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CHILE
a country study
Federal Research Division
Library of Congress
Edited by
Rex A. Hudson
Research Completed March 1994
Data as of March 1994
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Foreword
This volume is one in a continuing series of books prepared by the Federal Research Division of the Library of Congress under the Country Studies/Area Handbook Program sponsored by the Department of the Army. The last two pages of this book list the other published studies.
Most books in the series deal with a particular foreign country, describing and analyzing its political, economic, social, and national security systems and institutions, and examining the interrelationships of those systems and the ways they are shaped by cultural factors. The authors seek to provide a basic understanding of the observed society, striving for a dynamic rather than a static portrayal. Particular attention is devoted to the people who make up the society, their origins, dominant beliefs and values, their common interests and the issues on which they are divided, the nature and extent of their involvement with national institutions, and their attitudes toward each other and toward their social system and political order.
The books represent the analysis of the authors and should not be construed as an expression of an official United States government position, policy, or decision. The authors have sought to adhere to accepted standards of scholarly objectivity. Corrections, additions, and suggestions for changes from readers will be welcomed for use in future editions.
Louis R. Mortimer
Chief
Federal Research Division
Library of Congress
Washington, D.C. 20540-5220
Data as of March 1994
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Acknowledgements
The book editor would like to thank the chapter authors for reviewing and commenting on various chapters. In particular, the observations and country expertise of Arturo Valenzuela and J. Samuel Valenzuela, who closely reviewed the text, contributed greatly to the overall quality of the book. J. Samuel Valenzuela also contributed anonymously to Chapter 5, "National Security." In addition, the book editor would like to thank Scott D. Tollefson for his invaluable support in volunteering to amend Chapter 5, "National Security," and to comment on Chapter 4, "Government and Politics."
The authors are grateful to individuals in various agencies of the United States government; international organizations; private institutions, including the Latin American School of Social Sciences (Facultad Latinoamericana de Ciencias Sociales--FLACSO) in Santiago; and Chilean diplomatic officers, who offered their time, special knowledge, or research facilities and materials to provide information and perspective. Thanks also go to Ralph K. Benesch, who oversees the Country Studies/Area Handbook Program for the Department of the Army. None of these individuals, however, is in any way responsible for the work of the authors.
The book editor would like to thank members of the Federal Research Division who contributed directly to the preparation of the manuscript. These include Sandra W. Meditz, who reviewed all textual and graphic materials, served as liaison with the sponsoring agency, and provided numerous substantive and technical contributions; Marilyn L. Majeska, who supervised the editing; Andrea T. Merrill, who edited the tables, figures, and Bibliography managed production; and Barbara Edgerton and Izella Watson, who did the word processing. Thanks also go to Vincent Ercolano, who performed the copyediting of the chapters; Cissie Coy, who performed the final prepublication editorial review; and Joan C. Cook, who compiled the index. The Library of Congress Printing and Processing Section performed the phototypesetting, under the supervision of Peggy Pixley.
David P. Cabitto provided invaluable graphics support, including preparation of several maps and the cover and chapter illustrations. He was assisted by Harriett R. Blood, who prepared the topography and drainage map, and by the firm of Greenhorne and O'Mara.
Finally, the authors acknowledge the generosity of the individuals and the public, private, diplomatic, and international agencies who allowed their photographs to be used in this study.
Data as of March 1994
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Table of Contents
* CHILE
* Foreword
* Acknowledgements
* PREFACE
* Table A. Chronology of Important Events
* Country Profile
o COUNTRY
o GEOGRAPHY
o SOCIETY
o ECONOMY
o TRANSPORTATION AND TELECOMMUNICATIONS
o GOVERNMENT AND POLITICS
o NATIONAL SECURITY
* INTRODUCTION
* Chapter 1. Historical Setting
o PRECOLUMBIAN CIVILIZATIONS
o CONQUEST AND COLONIZATION, 1535-1810
* Politics and War in a Frontier Society
* The Colonial Economy
* Bourbon Reforms, 1759-96
o WARS OF INDEPENDENCE, 1810-18
o CIVIL WARS, 1818-30
o ARISTOCRATIC REPUBLICANISM, 1830-91
* The Conservative Era, 1830-61
* The Portalian State, 1830-37
* Two Conservative Presidencies, 1841-61
* The Liberal Era, 1861-91
* War of the Pacific, 1879-83
* Downfall of a President, 1886-91
o PARLIAMENTARY REPUBLIC, 1891-1925
* Urbanization
* Arturo Alessandri's Reformist Presidency, 1920-25
o MILITARY INTERVENTIONS, 1925-32
* The 1925 Constitution
* Carlos Ibáñez's First Presidency, 1927-31
o MASS DEMOCRACY, 1932-73
* Alessandri's Second Presidency, 1932-38
* Popular Front Rule, 1938-41
* Juan Antonio Ríos's Presidency, 1942-46
* Gabriel González Videla's Presidency, 1946-52
* Ibáñez's Second Presidency, 1952-58
* Jorge Alessandri's Rightist Term, 1958-64
* Eduardo Frei's Christian Democracy, 1964-70
* Salvador Allende's Leftist Regime, 1970-73
o MILITARY RULE, 1973-90
* Neoliberal Economics
* The 1980 Constitution
* The Crisis of 1982 and the Erosion of Military Rule
* Chapter 2. The Society and Its Environment
o GEOGRAPHY
* A Long, Narrow Nation
* Natural Regions
* The Far North
* The Near North
* Central Chile
* The South
* The Far South
o THE PEOPLE
* Formation of the Chilean People
* Current Demographic Profile
o URBAN AREAS
o RURAL AREAS
o THE LABOR FORCE AND INCOME LEVELS
o SOCIAL ORGANIZATIONS AND ASSOCIATIONS
o WELFARE INSTITUTIONS AND SOCIAL PROGRAMS
* Social Security
* Health Programs
* Housing Policies
o EDUCATION
* Enrollments
* Administration and Reforms
* Primary and Secondary Education
* Higher Education
o RELIGION AND CHURCHES
* Religious Affiliations and Church Organization
* Religion in Historical Perspective
* Forms of Popular Religiosity
o ATTITUDES TOWARD FAMILY AND GENDER
* Divorce, Abortion, and Contraception
* Family Structure and Attitudes Toward Gender Roles
o WHITHER CHILE?
* Chapter 3. The Economy
o EVOLUTION OF THE ECONOMY
* The Colonial Era to 1950
* Economic Policies, 1950-70
* The Popular Unity Government, 1970-73
* Economic Crisis and the Military Coup
* The Military Government's Free-Market Reforms, 1973-90
* Trade Policy
* Banking Reform and the Financial Sector
* Rural Land Market Reform
* Labor-Market Reform
* Public Employment Programs
* The Debt Crisis: Further Reforms and Recovery
* The Return to Democracy, 1990
* Continuity in Economic Policy
* Emphasis on Social Programs
o THE CURRENT STRUCTURE OF THE ECONOMY
* Industry and Manufacturing
* Mining
* Agriculture
* Fishing and Forestry
* Fishing
* Forestry
* Energy
* Banking and Financial Services
* Transportation
* Telecommunications
* Tourism
* Construction
o INCOME, LABOR UNIONS, AND THE PENSIONS SYSTEM
* Employment and Unemployment
* Income Distribution and Social Programs
* Unions and Labor Conflicts
* Economic Results of the Pensions Privatization
o MACROECONOMIC POLICY, INFLATION, AND THE BALANCE OF PAYMENTS
* The Central Bank and Monetary Policy
* Exchange-Rate Policy and the Balance of Payments
* Trade Policy and Export Performance
o THE FUTURE OF THE ECONOMY
* Chapter 4. Government and Politics
o CONSTITUTIONAL HISTORY
* Development and Breakdown of Democracy, 1830-1973
* Imposition of Authoritarian Rule
* The Constitution of 1980
* Authoritarianism Defeated by Its Own Rules
* The Constitutional Reforms of 1989
o THE STATE AND GOVERNMENT INSTITUTIONS IN CHILE
* The State and the System of Government
* The Presidency
* The Legislative Branch
* The Courts
* The Autonomous Powers
* The Comptroller General
* The Constitutional Tribunal
* The Central Bank of Chile
* The Electoral Certification Tribunal
* The Armed Forces
* Regional and Local Government
o PARTIES AND THE ELECTORAL SYSTEM
* The Party System
* The Electoral System
* The Parties of the Left
* The Parties of the Center
* The Parties of the Right
* The 1993 Presidential Election
o THE CHURCH, BUSINESS, LABOR, AND THE MEDIA
* The Church
* Business
* Labor
* The Media
o FOREIGN RELATIONS
* Relations with the United States
* General Relations
o FUTURE CHALLENGES OF DEMOCRATIC CONSOLIDATION
* Chapter 5. National Security
o MILITARY TRADITION AND THE EVOLUTION OF THE ARMED FORCES
* Early History
* Genesis of the Armed Forces, 1814-36
* Confederation War, 1836-391
* War of the Pacific, 1879-83
* Development of the Armed Forces
* Growth of United States Influence
* Repression and Human Rights Violations
* Civil-Military Relations
o MISSION AND ORGANIZATION OF THE ARMED FORCES
* Mission
* Command Structure
* Army
* Navy
* Air Force
* Civic Action
* Defense Spending
o MANPOWER AND TRAINING
* Recruitment and Conditions of Service
* Training
* Uniforms, Ranks, and Insignia
* Army
* Navy
* Air Force
o FOREIGN SOURCES OF Matériel
o THE DEFENSE INDUSTRY
* Army Ordnance
* Naval Equipment
* Aircraft Equipment
* Cardoen Industries
* Minor Defense Manufacturers
o THE SECURITY FORCES
* The Carabineros
* Organization
* Recruitment and Training
* Uniforms
* The Investigations Police
* Internal Security Intelligence Organizations
o PUBLIC ORDER AND INTERNAL SECURITY
* Incidence of Crime
* Narcotics Trafficking
* Criminal Justice
* The Penal System
* Terrorism
* A Modern Deterrent?
* Appendix. Tables
* Bibliography
* Glossary
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PREFACE
Like its predecessor, this study is an attempt to examine objectively and concisely the dominant historical, social, environmental, economic, governmental, political, and national security aspects of contemporary Chile. Sources of information included books, journals, other periodicals and monographs, official reports of governments and international organizations, and numerous interviews by the authors with Chilean government officials. Chapter bibliographies appear at the end of the book; brief comments on sources recommended for further reading appear at the end of each chapter. To the extent possible, placenames follow the system adopted by the United States Board on Geographic Names. Measurements are given in the metric system; a conversion table is provided to assist readers unfamiliar with metric measurements (see table 1, Appendix). A glossary is also included.
Spanish surnames generally are composed of both the father's and mother's family names, in that order, although there are numerous variations. In the instance of Eduardo Frei Ruiz-Tagle, for example, Frei is his patronymic and Ruiz-Tagle is his mother's maiden name. In informal use, the matronymic is often dropped, a practice that usually has been followed in this book, except in cases where the individual could easily be confused with a relative or someone with the same patronymic. For example, Frei Montalva's son Eduardo Frei Ruiz-Tagle, is the current president.
The body of the text reflects information available as of March 31, 1994. Certain other portions of the text, however, have been updated. The Introduction discusses significant events that have occurred since the completion of research, the Country Profile includes updated information as available, and the Bibliography lists recently published sources thought to be particularly helpful to the reader.
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Table A. Chronology of Important Events
Period
Description
SIXTEENTH CENTURY
October 21, 1520
Ferdinand Magellan first European to sight (but not
identify) Chilean shores.
1535-37
Diego de Almagro leads first Spanish expedition to
explore Chile.
1540
Pedro de Valdivia conquers Chile.
February 12, 1541
Valdivia founds Santiago.
1553-58
Indigenous Araucanian uprising.
1557
Mapuche rebel chief Lautaro defeated.
1560s
Alonso de Ercilla y Zúñiga composes epic poem "La
Araucana."
SEVENTEENTH CENTURY
1603
First army-like force, or militia, established in Chile.
1609
Pope Paul V authorizes war against Araucanians.
1643
Although warfare against Araucanians continues, Indians
help Spaniards repel invasion of southern Chile by Brouwer
expedition.
1647
Earthquake destroys Santiago.
EIGHTEENTH CENTURY
1730
Earthquake causes great destruction in Santiago and most
of central Chile.
1759-96
Bourbon reforms give Chile greater independence from
Viceroyalty of Peru.
1791
Governor Ambrosio O'Higgins y Ballenary outlaws
encomiendas and forced labor.
NINETEENTH CENTURY
September 18, 1810 Criollo leaders of Santiago declare
independence from Spain.
1814-17
(La Reconquista)
October 2, 1814
The Reconquest Spanish troops from Peru reconquer Chile at
Battle of Rancagua.
February 12, 1817
Troops led by Bernardo O'Higgins Riquelme, father of
Chile, and General José de San Martín defeat Spanish in
Battle of Chacabuco.
1817
O'Higgins (1817-23) becomes supreme director of Chile.
April 5, 1818
Chile wins formal independence after San Martín defeats
last large Spanish force in Battle of Maipú.
August 1818
First provisional constitution approved in plebiscite.
1818-30
Period of civil wars.
April 17, 1830
Liberals defeated by Conservatives at Battle of Lircay.
1830-61
Period of Conservative rule.
1830-37
"Portalian State" initiated by businessman Diego Portales
Palazuelos, who dominates politics.
1833
New Portalian constitution implemented.
1836-39
Chile wages war against Peru-Bolivia Confederation.
January 1839
Chile wins war by defeating Peruvian fleet at Casma on
January 12 and Bolivian Army at Yungay on January 20.
1861-91
Period of Liberal rule.
1879-83
Chile wages war against Bolivia and Peru in War of the
Pacific.
1883
Chile seals victory with Treaty of Ancón.
1891
Civil war pits supporters of President José Manuel
Balmaceda Fernández against Congress, which wins.
TWENTIETH CENTURY
1891-1925
Period of Parliamentary Republic.
1925
Chile's second major constitution approved.
1945
Gabriela Mistral wins Nobel Prize for Literature.
September 4, 1970
Popular Unity's Salvador Allende Gossens wins presidential
election.
1971
Pablo Neruda wins Nobel Prize for Literature.
September 11, 1973
Military led by General Augusto Pinochet Ugarte overthrows
Allende government.
September 1973-90
Period of military rule under General Pinochet.
1980
New military-designed constitution is approved in a
plebiscite.
1988
Plebiscite held on Pinochet rule.
1990
Transition to democracy begins with presidency of Patricio
Aylwin Azócar.
March 11, 1994
Aylwin is succeeded by Eduardo Frei Ruiz-Tagle.
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Country Profile
COUNTRY
Official Name: Republic of Chile (República de Chile).
Short Name: Chile.
Term for Citizen(s): Chilean(s).
Capital: Santiago.
GEOGRAPHY
Size: 756,950 square kilometers (nearly twice the size of California); land area: 748,800 square kilometers, including Easter Island (Isla de Pascua; 118 square kilometers), Islas Juan Fernández (179 square kilometers), and Isla Sala y Gómez, but excluding claimed Chilean Antarctic Territory (Territorio Chileno Antártico), which covers 1,249,675 square kilometers (not recognized by the United States).
Coastline: 6,435 kilometers (continental Chile).
Maritime Claims: Contiguous zone: twenty-four nautical miles; continental shelf: 200 nautical miles; exclusive economic zone: 200 nautical miles; territorial sea: twelve nautical miles.
Disputes: Bolivia has sought a sovereign corridor to Pacific Ocean since ceding Antofagasta to Chile in 1883; Río Lauca water rights in dispute between Bolivia and Chile; short section of southern boundary with Argentina is indefinite; Lago del Desierto (Desert Lake) region under international arbitration as a result of a border conflict between Argentina and Chile; Chile's territorial claim in Antarctica partially overlaps Argentina's claim.
Topography and Climate: One of narrowest countries in the world, averaging 177 kilometers wide (ninety kilometers wide at its thinnest point in the south and 380 kilometers across at its widest point in the north). Rugged Andes Mountains run down eastern side of country. Cordillera Domeyko (Domeyko mountain chain) in northern part of country runs along the coast parallel to the Andes. Five north-to-south natural regions: desert far north (Norte Grande), consisting of dry brown hills and sparse vegetation and containing extremely arid Atacama Desert and Andean plateau; near north (Norte Chico), a semiarid region between Río Copiapó and Santiago; Central Chile (Chile Central), most densely populated region, including three largest metropolitan areas--Santiago, Valparaíso, and Concepción--and the fertile Central Valley (Valle Central), with a temperate, Mediterranean climate; heavily forested south (Sur de Chile), south of Río Bío-Bío, containing cool and very rainy (especially during winter) lake district and crisscrossed by hundreds of rivers; far south (Chile Austral), sparsely populated, forested, constantly cold and stormy, with many fjords, inlets, twisting peninsulas, and islands. Land use: 7 percent arable (of which 29 percent irrigated), 16 percent meadows and pasture, 21 percent forest and woodland, 15 percent other, including 1 percent irrigated. Temperate rain forest totals 14,164,045 hectares. Annual rate of deforestation (1981-85): 0.7 percent. Nearly 607,030 hectares clear-cut (stripped of all trees) since 1978. Seasons: spring--September 21 to December 20; summer--December 21 to March 20; autumn--March 21 to June 20; winter--June 21 to September 20.
Principal Rivers: Aconcagua, Baker, Bío-Bío, Imperial, Loa (Chile's longest at about 483 kilometers), Maipo, Maule, Palena, Toltén, Valdivia.
Principal Lakes: Del Toro, General Carrera, Llanquihue, Puyehue, Ranco, Rupanco, Sarmiento, Villarrica.
SOCIETY
Population: 13.7 million (July 1993 estimate), with 1.6 percent average annual population growth rate between 1982-92. Projected annual population growth rate 1991-2000, 1.5 percent. Density, 18 persons per square kilometer (1993), with great regional variations. Fifth, Eighth, and Santiago Metropolitan regions contained 63 percent of population, with about 39 percent or 5.3 million in Santiago Metropolitan Region (1992). Population about 86 percent urban, 14 percent rural. Urban population annual growth rate in 1960-91, 2.6 percent; projected 1991-2000, 1.8 percent. Of some 335 communities nationally in 1993, poorest twenty-one located in regions of Araucanía (eleven), Bío-Bío (five), and Coquimbo (five), containing 2.62 percent of national population.
Ethnic Groups: Mestizo (mixed native American and European ancestry), 66 percent; European, 25 percent; native American, 7 percent; other, 2 percent. Under law of September 28, 1993, state recognizes Mapuche (also called Araucanian), Aymara, Rapa Nui, Quechua, Colla, Alacalufe, and Yagán as main indigenous communities. Native Americans totaled 1.3 million in 1992, including 928,069 Mapuche, 48,477 Aymara, and 21,848 Rapa Nui. Quechua and Aymara located in north; Alacalufe and Ona in south; Mapuche, who speak Mapudungu, in south and Central Chile, mostly around Temuco; Pascuene and Huilliche in Easter Island territory. Only Mapuche and former Huilliche islanders managing to survive culturally on mainland.
Official Language: Spanish (called Castellano in Chile).
Education and Literacy: In 1966 primary education became eight years and secondary education four years. School calendar: March through December. In mid-1980s primary school attendance varied between 93 percent and 96 percent; by 1989 secondary school enrollment had risen to 75 percent. Students in universities and professional institutes numbered about 153,100 in 1989, or 10.3 percent. Combined primary and secondary school enrollment ratio in 1987-90: 90 percent. Adult literacy rate 94.6 percent, with average of 7.5 years of schooling (1992).
Health: Heavy investments in programs for very poor and in water and sanitation systems helped lower infant mortality rates and raise life expectancy, giving country a relatively high human development index (HDI) world ranking of thirty-sixth in 1992. Proportion of Chileans living in poverty decreased from 45 percent in 1985 to 33 percent in 1992. Birthrate 22.4 per 1,000 population; total fertility rate 2.7 children born per woman (1993); death rate 5.6 deaths per 1,000 population (1992). In 1993 life expectancy estimated at seventy-one years male, seventy-seven years female (74 total). Infant mortality rate in 1992: 17 per 1,000 live births. Population with access to health services in 1988-90, 95 percent; safe water, 86 percent (rural/urban average), 100 percent (urban); sanitation 83 percent; sanitary services 100 percent urban, 6 percent rural. Recorded twenty-eight cholera cases in first nine months of 1993, with no deaths. In 1984-89 population per doctor: 1,230. Social security benefits expenditures as a percentage of GDP: 9.9 percent (1980-89).
Religion: In 1992 census, population segment aged fourteen years and older (totaling 9,775,222), 76.7 percent declared Roman Catholic, 13.2 percent Evangelical or Protestant, 7 percent indifferent or atheist, and 4.2 percent other, including small Jewish, Muslim, and Christian Orthodox communities. Roman Catholic Church source of significant opposition to military regime of General Augusto Pinochet Ugarte (1973-90), playing key role in protection of human rights. Church's influence in society has diminished since 1970s because of substantial growth of Pentecostal (Evangelical) churches.
ECONOMY
Gross Domestic Product (GDP): One of Latin America's most economically developed countries, with a diversified, free-market economy. GDP US$33.7 billion (1992). GDP per capita between US$2,515 and about US$2,800 (1992), US$3,160 (1993). During 1990-93 period, poorest 20 percent of population experienced increase in income of 30 percent. GDP growth rate in 1992: 10.4 percent. Slowed to 6 percent in 1993. GDP growth projected by Central Bank to be 4.5 percent in 1994, and by Economist Intelligence Unit (EIU) to be 8 percent in 1995.
Gross National Product (GNP): In 1992 GNP per capita US$2,550; 1.1 percent annual per capita growth rate 1980-90 period. Total GNP in 1990: about US$25.5 billion; 2.8 percent annual growth rate of GNP in 1980-90 period.
Agriculture: Agriculture, forestry, and fishing accounted for 8.2 percent of GDP in 1992, according to EIU, or 6.2 percent according to Inter-american Development Bank (IDB). Exports totaled US$1.2 billion (1991). Major crops--apples, corn, grapes, plums, potatoes, rice, sugar beets, and wheat, as well as forest products. Leading agricultural export--fruit. Leading agricultural imports-- bananas, coffee, corn, cotton, dry milk, rice, soybean, sugar, tea, and wheat. Although free-market oriented, agricultural sector protected by "price bands." Agriculture accounted for 18 percent of labor force (1989-91).
Industry: One of most highly industrialized countries in Latin America. Manufacturing accounted for 20.8 percent of GDP (1992), according to EIU, or 35.9 percent, according to IDB. Industrial exports totaled US$4 billion (1992), surpassing copper exports (US$3.9 billion) for first time, but slowed in 1993. Industry accounted for 20.8 percent of labor force (1992). Mining accounted for 6.7 percent of GDP (1992), with copper still most important product in 1993, despite plunging prices (accounting for 30 percent of total value of exports in 1991). World's leading copper producer since 1982. Estimated 2 million tons of copper produced (1993), up from 1.9 million tons (1992). Opening of new copper mines and increasing output at existing mines expected to boost country's share of world copper production from 17.5 percent in 1990 to about 33 percent in 2000, or 3.3 million tons by 2000. Chile produces about twenty-four nonmetallic minerals, with exports amounting to US$191 million (1993).
Energy: National energy reliance on petroleum and natural gas, 60 percent; hydroelectric power, 25 percent; coal, 15 percent. In 1992 kilowatt capacity 5,769,000; kilowatt hours produced, 22,010 million. Annual rate of change in commercial energy consumption (1980-90), 2.9 percent. However, electricity demand rose by 8 percent in 1993, and growth of more than 6 percent was expected for 1994. Domestic oil consumption estimated 138,527 barrels per day (1991). Oil reserves declining at 10 percent per year; stood at 300 million barrels (1992). Estimated 17.9 billion barrels per day produced in 1991, equivalent to only 13 percent of domestic oil consumption. In 1992 Argentina and Chile agreed to build a trans-Andean oil pipeline. Gas production amounted to about 4 billion cubic meters in 1991. Work began on gas pipeline from Argentina in 1992.
Services: Accounted for 29.1 percent of GDP (1992), according to EIU, or 57.9 percent, according to IDB. Employed 26.4 percent of labor force (1991). Tourism one of key service industries. Total visitors--half of them from Argentina--grew from 1.35 million in 1991 to estimated 1.5 million in 1992; visitors spent estimated US$900 million in 1992 and 1993.
Exchange Rate: On August 5, 1994: 413.8 Chilean pesos (Ch$) per United States dollar, compared with 411 in August 1992 and 573 in August 1984. Three important changes in "crawling peg" exchange-rate policy during 1985-92 included first centering "reference" exchange rate set by Central Bank within a 6 percent intervention band; then, in January 1992, widening band to 10 percent and adjusting reference rate downward, and then making daily adjustments in relation to a currency basket (United States dollar; German mark, and Japanese yen). Annual devaluation running at 13 percent to 16 percent.
Balance of Payments: Continued trade surpluses since 1982 led to accumulation of unprecedented US$9.9 billion in international reserves by end of 1993. Country's foreign investment inflow in first eleven months of 1993 rose to US$2.3 billion, a 92 percent increase over the same period of 1992. Current account deficit in 1993 estimated at about 4.5 percent of GDP, or US$1.9 billion. Expected to broaden to US$2.4 billion, or 5.3 percent of GDP, in 1994. However, capital account surplus in 1993 created US$800 million overall balance of payments surplus (US$50 million more than in 1992). Balance of payments surplus in 1994 estimated at only US$100 million, with a current account deficit of US$2.4 billion.
Imports: Principally petroleum, wheat, capital goods, spare parts, motor vehicles, and raw materials, mainly from European Union (EU), United States, Japan, and Brazil. Imports expenditures in 1993 estimated at US$10.1 billion, with 20 percent growth of imports of capital goods. Liberal import policy. Import duty a flat 11 percent for most products, except for expensive luxury goods or commodities governed by price band, which often carry additional surtaxes; regional accords aiming to cut tariffs to zero. Imports also subjected to 18 percent value-added tax (VAT) on c.i.f. (cost, insurance, and freight) value. Duty-free imports of materials used in products for export within 180 days, with prior authorization. Free-zone imports, if reexported, are exempt from duties and VAT. Central Bank approval is needed for all imports.
Exports: Principally copper (accounting for about 35 percent of exports), industrial products, molybdenum, iron ore, wood pulp, seafood, fruits, and nuts, mainly to EU, United States, Japan, and Brazil. Constituted 34 percent of GDP in 1990; 7 percent annual growth rate 1980-90. International recession and lower commodity prices caused value of exports to fall 7 percent in 1993, but exports constituted about 36 percent of GNP that year. Estimated 1993 total export earnings of US$9.3 billion down by US$800 million, creating country's first trade deficit in more than a decade. In 1991-93 Japan was Chile's largest export market, surpassing Chile's exports to United States. In 1993 Chile was third-largest supplier of wine to United States, after Italy and France.
Foreign Debt: Despite substantial improvement in country's exports, foreign debt rose from US$17.4 billion in 1991 to US$18.9 billion in 1992 (or US$19.1 billion according to International Monetary Fund (IMF)) to an estimated US$20.2 billion in 1993. However, net foreign debt (total debt minus net international reserves) declined from 47 percent of GDP in 1989 to 21 percent of GDP in 1993. By early 1991, Chile was upgraded to status of nonrestructuring country, meaning that its debt was now considered recoverable, thus facilitating access to voluntary capital markets. In June 1991, became first Latin American country to benefit from reduction in debt with United States within framework of President George Bush's Initiative for the Americas agreement. In December 1993, Standard and Poor Corporation, a United States credit rating agency, raised Chile's credit rating from investment-grade (BBB) to BBB+ for long-term debt in foreign currency.
Fiscal Year (FY): Calendar year.
Fiscal Policy: International trade liberalized since 1979. Has had fundamentally sound market economy. Since 1990 democratically elected government has maintained export-led growth, fiscal discipline, and relatively low inflation. Exchange-rate policy, based on daily adjustments of nominal exchange rate and aimed at encouraging exports, has been at center of country's economic success. Gross domestic public investment in 1991: 2.9 percent of GDP; gross domestic private investment in 1991: 15.9 percent of GDP. Gross national savings in 1992: 18.4 percent of GDP. Average annual rate of inflation 20 percent in 1980-90 period. Inflation 18.7 percent in 1991, 12.7 percent in 1992, and 12.2 percent in 1993; projected by EIU to be 10 percent in 1994 and 9 percent in 1995. Unemployment in 1992 about 4.5 percent according to National Statistics Institute. Estimated 1994 budget US$1.14 billion.
TRANSPORTATION AND TELECOMMUNICATIONS
Roads: Totaled 79,025 kilometers, including 9,913 kilometers of paved roads, 33,140 kilometers of gravel roads, and 35,972 kilometers of improved and unimproved earth roads. Pan American Highway (Longitudinal Highway), running length of country, forms 3,600-kilometer backbone of road system, with transversal roads leading from it east and west. Southern extension of about 1,100 kilometers, Southern Highway, from Puerto Montt to Puerto Yungay, opened in 1988. International highways also include AricaSantos Highway to Bolivia and Trans-Andean Highway between Valparaíso and Mendoza, Argentina.
Vehicles: 1.7 million (1994), including 1,034,370 passenger cars, 403,842 vans, 49,006 buses, 126,698 trucks, 80,558 motorcycles, and 46,014 other commercial vehicles. An additional 202,000 vehicles expected to be registered in 1994.
Railroads: Mostly state-owned, operated by State Railroad Company (Empresa de Ferrocarrilles del Estado--EFE). Totaled 7,766 kilometers. Privately owned lines, totaling 2,130 kilometers, mostly in desert north, where northern terminal is Iquique. No passenger trains to northern Chile from Santiago. Four international railroads: two to Bolivia, one to northwest Argentina, and one to Peru. In 1992 Congress approved privatization of EFE, with only infrastructure remaining state owned. After period of neglect, government investment in EFE infrastructure was expected in 1993 to total US$98 million. In July 1993, Chile and Brazil invited Bolivia and Argentina to participate in joint effort to build interoceanic railroad line between Chilean and Brazilian coasts. Santiago has underground railroad system (metro).
Ports: Nine main ports: Antofagasta, Arica, Coquimbo, Iquique, Puerto Montt, Punta Arenas, San Antonio, Talcahuano (country's best harbor and its main naval station), and Valparaíso; also nine others. Only four or five have adequate facilities; about ten are used primarily for coastal shipping, restricted to Chilean flag vessels. Northern mining ports include Caldera, Chañaral, Coquimbo, and Huasco. Petroleum and gas ports include Cabo Negro, Clarencia, Puerto Percy, and San Gregorio. Main forest product ports San Vicente and Lirquén on Concepción Bay. Transnational transport of goods by road between Chilean ports of Antofagasta, Arica, Iquique, and Valparaíso and Brazilian ports of Santos and Porto Alegre. Government building a US$10 million commercial port in Punta Arenas to service growing number of foreign vessels, cruise liners, and scientific ships en route to Antarctica. Puerto Ventanas--first private port in country, located on Quinteros Bay, in Valparaíso Region--opened in 1993.
Waterways: 725 kilometers of navigable inland waterways, mainly in southern lake district; Río Calle Calle provides waterway to Valdivia.
Airports and Air Transport: 390 total, of which 351 are usable airports, forty-eight of them paved. Two international airports: Comodoro Arturo Merino Benítez International Airport at Pudahuel outside Santiago; Chacalluta International Airport, Arica. Three main Chilean carriers: National Airlines (Línea Aérea Nacional de Chile--LAN-Chile), Fast Air, and Chilean Airlines (Línea Aérea del Cobre--Ladeco). By 1993 air transportation market had grown by 56 percent since 1990. United States share of United States-Chile market increased from 34 percent in 1990 to 62 percent in late 1993.
Telecommunications: 342 radios, 205 televisions, and sixty-eight telephones per 1,000 people in 1990. Broadcast stations included 167 AM, no FM, 131 TV, and twelve shortwave stations. Modern telephone system based on extensive microwave relay facilities. Total telephones in 1991 about 768,000. In October 1993, Chilesat, a Telex Chile subsidiary, joined the Americas-1, Columbus-2, and Unisur cable networks, a fiber-optics telecommunications system through submarine cables linking South America with North America and Europe.
GOVERNMENT AND POLITICS
Government: Multiparty republic with a presidential system based on 1980 constitution, amended and approved by referendum in July 1989, with fifty-four reforms. Executive, legislative, and judicial branches. Executive power with president directly elected; successive reelection not allowed. Presidential candidates must win a majority or face a runoff. Under a constitutional reform approved by Congress in February 1994, the presidential term was reduced from eight to six years, the traditional term. Eduardo Frei Ruiz-Tagle, elected president of the Christian Democratic Party (Partido Demócrata Cristiano--PDC) on November 23, 1991, won the presidential election held on December 11, 1993, and assumed the presidency on March 11, 1994. National Security Council (Consejo de Seguridad Nacional--Cosena) includes president of republic, presidents of Supreme Court and Senate, and heads of armed forces and police. Bicameral National Congress (located in Valparaíso): Senate, with forty-six members, including eight designates, serving eight-year terms, and Chamber of Deputies with 120 members serving four-year terms. Courts include Supreme Court (seventeen judges), seventeen appellate courts, and a number of military courts.
Administrative Subdivisions: Twelve numbered regions (regiones, I to XII) and Santiago Metropolitan Region. Numbered regions each headed by an intendant (intendente). Regions subdivided into total of fifty-one provinces (provincias), each headed by a governor (governador) and 300 municipalities (municipalidades), each headed by a mayor (alcalde) appointed by the municipal council (in towns with fewer than 10,000 inhabitants) or by the president of the republic (in towns with more than 10,000 inhabitants). Lowest subdivision, communes (comunas). Santiago, like other cities, headed by a mayor.
Politics: Governing coalition, the Coalition of Parties for Democracy (Concertación de Partidos por la Democracia--CPD), dominated by PDC and socialists, expected to retain control in Congress, but without increase in legislative strength it may be unable to introduce important constitutional reform, such as composition of Constitutional Tribunal, membership and functions of Cosena, and promotion of military officers.
Political Parties: Left--Communist Party of Chile (Partido Comunista de Chile--PCCh) discredited since October 1988 plebiscite (which PCCh claimed regime would not allow Pinochet to lose), revolution in Eastern Europe, and disintegration of Soviet Union. Party for Democracy (Partido por la Democracia--PPD), which is an independent-minded creation of the Socialist Party (Partido Socialista--PS) and a member of Aylwin government's CPD coalition, became second most popular party in 1993, after PDC. United Popular Action Movement (Movimiento de Acción Popular Unitario--MAPU), a Mapuche leftist party, quit CPD in June 1993. Christian Left (Izquierda Cristiana--IC), a minor leftist party and CPD member. Humanist-Green Alliance Party (Partido Alianza Humanista Verde-- PHV) also left CPD in 1993. Center--PDC had most followers in 1993, with 35.5 percent of overall votes. Radical Party (Partido Radical- -PR) supporting Frei Ruiz-Tagle in 1993. Right--National Renewal (Renovación Nacional--RN). Independent Democratic Union (Unión Democrática Independiente--UDI), political voice of former military regime's economic and political elite. Although RN dominant rightist party, it and UDI main rivals for leadership of right. Union of the Centrist Center (Unión de Centro Centro--UCC), also a rightist party. On July 3, 1993, center-right parties--RN, UDI, UCC, National Party (Partido Nacional--PN), and Liberal Party (Partido Liberal--PL)--agreed to form coalition called Union for the Progress of Chile (Unión por el Progreso de Chile). However, center-right remained in disarray prior to December 1993 elections.
Foreign Relations: Pro-West, pro-democracy. Maintains relations with more than seventy countries. Since restoration of democratic government in 1990, has reestablished political and economic ties with other Latin American countries, North America, Europe, and Asia. United States-Chilean relations have improved considerably since return to democracy and progress on issue of 1976 assassination in Washington of former Chilean ambassador to United States Orlando Letelier and United States citizen Ronnie Moffitt. Although shunning multilateral regional integration schemes, entered into bilateral tariff-cutting accords with individual Latin American countries--including Argentina, Bolivia, Colombia, and Mexico--in early 1990s, as well as negotiated framework trade agreement with United States in October 1990. Since joining Rio Group in 1990, has played active role in promoting democracy within inter-American system.
International Agreements and Membership: Member, Agency for the Prohibition of Nuclear Weapons in Latin America and the Caribbean; Asia Pacific Economic Cooperation; Customs Cooperation Council; Economic Commission for Latin America and the Caribbean ( ECLA--see Glossary); General Agreement on Tariffs and Trade; Group of Eleven; Group of 77; Inter-American Development Bank; International Atomic Energy Commission; International Bank for Reconstruction and Development (IBRD); International Civil Aviation Organization; International Confederation of Free Trade Unions; International Criminal Police Organization; International Development Association; International Fund for Agricultural Development; International Labor Organization; IMF; International Maritime Satellite Organization; International Monetary Organization; International Office for Migration; International Telecommunications Satellite Organization; International Telecommunications Union; Latin American Economic System; Latin American Integration Association; League of Red Cross and Red Crescent Societies; Organization of American States; Organization of Copper Exporting Countries; Pacific Economic Cooperation Council; Rio Group; United Nations and its main affiliated organizations; Universal Postal Union; World Confederation of Labor; World Federation of Trade Unions; World Health Organization; World Intellectual Property Organization; World Meteorological Organization; and World Tourism Organization.
NATIONAL SECURITY
Armed Forces: Despite seventeen years of military rule (1973-90), still exceptionally professional and generally free of factionalism or partisan politics. In 1992 combined strength at least 91,800 (including 54,000 army, 25,000 navy, and 12,800 air force). Army reserves additional 50,000.
Defense Budget: Defense budget averaged US$1 billion annually in 1990-93. Annual average imports of major conventional arms US$212 million in 1987-91; as a percentage of national imports in 1990, 3.0 percent.
Military Units: Army organized into seven military areas (Áreas Militares--AMs)--headquartered in Antofagasta, Santiago, Concepción, Valdivia, Punta Arenas, Iquique, and Coihaique--and seven divisions, one for each AM. Navy organized into four naval zones, headquartered in Iquique, Punta Arenas, Talcahuano, and Valparaíso. Operational command included Fleet, Submarine Command, and Transport Force. Navy included Navy Infantry Corps (4,200 marines), Naval Aviation (750 members), and Coast Guard (1,500 members). Air Force organized into three commands--Combat, Personnel, and Logistics--four air brigades, and twelve groups or squadrons. Air brigades headquartered in Iquique, Santiago, Puerto Montt, and Punta Arenas. Also operated an airbase on King George Island, Antarctica.
Military Equipment: Ground forces equipped with fortyseven AMX-13 light tanks and twenty-one AMX-30 medium battle tanks from France; fifty M-41, sixty M-24, and 150/M51 Super-Sherman tanks from United States/Israel; and 500 armored personnel carriers (APCs) from Brazil and 100 from United States. Navy ships include four missile destroyers, two missile frigates, and four submarines. Marines equipped with forty French APCs. Air force equipment includes sixteen F-5 fighters from United States, fifteen Dassault Mirage fighters from France, and thirty-two Hawker Hunters from Britain, as well as twenty Chilean-made strike aircraft and sixtyeight trainers (made partially or wholly by Chile).
Police: Official name: Forces of Order and Public Security. Consist of two separate law-enforcement forces: Carabineros (national, 31,000-member paramilitary police force) and Investigations Police (national, 4,000-member plainclothes organization). Carabineros organized into three main zones-- Northern, Central, and Southern--with marine and air sections. Investigations Police operated in support of Carabineros and intelligence services of armed forces. For example, Investigations Police operated an antinarcotics force. In addition to law enforcement and traffic management, Carabineros engaged in narcotics suppression, border control, and counterterrorism. Italy and Spain pledged to help Aylwin government finance and train civilian-based security force capable of combatting terrorist threat.
Insurgents: Three main terrorist groups still sporadically active in 1993: pro-Cuban Movement of the Revolutionary Left (Movimiento de la Izquierda Revolucionaria), United Popular Action Movement-Lautaro (Movimiento de Acción Popular Unitario-Lautaro), Lautaro Youth Movement (Movimiento Juvenil Lautaro), Manuel Rodríguez Patriotic Front (Frente Patriótica Manuel Rodríguez), and Maoist-oriented Manuel Rodríguez Patriotic Front-Autonomous (Frente Patriótica Manuel RodríguezAutónomo ). None a serious threat to national security, but each capable of occasional acts of terrorism.
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INTRODUCTION
THE SOUTHERNMOST NATION of Latin America and one of the longest and narrowest nations in the world, Chile may derive its name from the indigenous Mapuche word "Chilli," which may mean "where the land ends. The Mapuche's own name means "people (che) of the land (mapu)." Another meaning attributed to Chilli is the onomatopoeic cheele-cheele--the Mapuche imitation of a bird call. The Spanish conquistadors heard about Chilli from the Incas of Peru, who had failed to conquer the land inhabited by the Araucanians, of which the Mapuche in central Chile was the most warlike group. The few survivors of Diego de Almagro's first Spanish expedition south from Peru in 1535-37 called themselves the "men of Chilli."
As native American tribes became for the United States, the Araucanians, who mastered horsemanship and Spanish military strategy, became part of Chile's "noble savage" lore. This is exemplified by the legend of the Mapuche warrior Lautaro (the Chilean equivalent of the North American Apache Geronimo) in the epic poem "La Araucana," written, initially on bark, in the 1560s by Spanish soldier-poet Alonso de Ercilla y Zúñiga. This conquistador may have been the first to employ the term "Araucanian" (araucano, from arauca, the Inca word for enemy), which has been widely used as a general term for Chile's indigenous peoples. The Spaniards and their criollo successors continued to wage warfare against the Mapuche until 1883, when the government was forced to grant them autonomy. The Mapuche population has increased significantly in the twentieth century, to about 928,000 in 1992, but they have not had much cultural influence on the largely European and mestizo (see Glossary) population of Chile.
Despite its geographical isolation by formidable barriers--the Andes Mountains on its eastern flank, the Atacama Desert in its northernmost area, and the Pacific Ocean on its western side-- Chile, after Uruguay, traditionally has been one of South America's best educated and most stable and politically sophisticated nations. Chile enjoyed constitutional and democratic government for most of its history as a republic, particularly after adoption of the 1833 constitution. After a period of quasi-dictatorial rule in the 1920s and early 1930s, Chile developed a reputation for stable democratic government. Like Uruguayans, Chileans have benefited from state-run universities, welfare institutions, and, beginning in 1952, a national health system. Sociologist J. Samuel Valenzuela points out in "The Society and Its Environment" chapter that Chilean universities, for example, contributed to the Chileans' strong sense of national identity.
Throughout the 1970-90 period, however, Chilean national identity was tested as the country was subjected to profound political, economic, and social changes. Although the country began the 1970s by embarking on what soon proved to be a disastrous experiment in socialism, it ended the 1980s with a widely acclaimed free-market economy and a military government that had committed itself, albeit inadvertently, through a plebiscite, to allowing a transition to democracy in 1990. Since the restoration of democracy, Chile has served as a model for other developing nations and the East European countries that are attempting to make a similar transition to democratic government and an antistatist, free-market economy. Yet the Chileans endured rough times before finding an economic prescription that works for them.
During the ill-fated Popular Unity (Unidad Popular) government of its Marxist president, Salvador Allende Gossens (1970-73), Chile experienced uncharacteristic economic and political turbulence. As economic and political conditions deteriorated rapidly in August 1973, the Chilean Armed Forces and even the moderate Christian Democratic Party (Partido Demócrata Cristiano--PDC), Chile's largest single party, began to view the Allende government's socialist economic policies as a threat to the constitutional order that the armed forces felt duty-bound to uphold, at whatever cost. On September 11, 1973, the armed forces shocked the world by attacking the lightly defended presidential palace, La Moneda, with army troops and aerial bombardment. Led by newly appointed army commander General Augusto Pinochet Ugarte, the bloody coup seemed incongruously violent for a country of Chile's democratic and civil traditions, especially considering that Allende had been elected democratically and had won a substantial 43 percent of the vote in the March 1973 congressional elections. Not having fought a real war since the War of the Pacific (1879-83) against Peru and Bolivia, the army seemed to welcome a pretext for reminding Allende's supporters of the military option contained in their own national motto, "By reason or by force."
In the "Historical Setting" chapter, historian Paul W. Drake summarizes various explanations for Allende's downfall and the coup as posited by analysts of the different political tendencies. Drake takes a similarly egalitarian approach to assessing blame by noting that "there was ample blame to go around," and that "groups at all points on the political spectrum helped destroy the democratic order by being too ideological and too intransigent." Prior to the coup, Chilean society became polarized between Allende's supporters and the growing opposition, particularly during the culmination of the constitutional crisis in August 1973. In political terms, society was divided into three hostile camps--the Marxist left, the Christian Democratic center, and the conservative right. In "The Economy" chapter, economists Sebastian Edwards and Alejandra Cox Edwards blame the Allende government's downfall to a large extent on its disregard of "many of the key principles of traditional economic theory." In their analysis, Allende's UP government did this not only in its monetary policies but also in its lack of attention to the role that the real exchange rate plays in a country's international competition and balance of payments.
The Allende episode has remained politically charged during the past two decades, as evidenced by the march by Socialists and Communists on La Moneda and their skirmishes with police on the occasion of the twentieth anniversary of Allende's overthrow. A peculiar aspect of the historiography of the military coup, one that is illustrative of the political sensitivities surrounding it, is how Allende's death has been described. Some scholars have mentioned both versions of his death--the official military account that he committed suicide and the left-wing version that he was assassinated by the military. Others, including historian Mark Falcoff, have used the more noncommittal phrase that Allende "died in the coup." Thanks in large part to the assassination myth that Cuban president Fidel Castro Ruz and Colombian novelist Gabriel García Márquez helped to create, the left-wing version is still widely believed. Available evidence, however, is adequate to reasonably conclude that Allende committed suicide with the AK-47 assault rifle given him by Castro. Scholars such as Paul E. Sigmund and James Dunkerley believe it was suicide, and reference sources and mainstream news media tend to use this version. For example, in a New York Times report on the twentieth anniversary of the coup, correspondent Nathaniel C. Nash states that Allende "killed himself rather than be taken."
It is fairly well known that Allende was a long-time admirer of Chilean president José Manuel Balmaceda Fernández (1886-91), who shot himself to death while inside the Argentine legation on September 19, 1891, the day after his term ended. Balmaceda committed suicide as a result of his defeat in the Civil War of 1891 between his supporters and those of Congress. In contrast to Peruvian president Alberto Fujimori's bloodless "self-coup" in April 1992, in which he dissolved the National Congress for being "obstructionist," Balmaceda's attempt to establish a strong executive and destroy the National Congress (Congreso Nacional; hereafter, Congress) resulted in the deaths of 10,000 Chileans. Yet Balmaceda's economic nationalism made him a hero of the left. In the weeks before the 1973 military coup, Allende, who like Balmaceda had overstepped his constitutional authority, had made his obsession with suicide as a last resort known to various individuals, including French president François Mitterrand. The coup and Allende's death were a tragic denouement to a chapter in Chilean history that most Chileans probably would like to forget, just as they would like to forget the repression that followed.
After the overthrow of the Allende government, Chile was plunged into a long period of repressive military rule. According to the National Commission on Truth and Reconciliation (the Rettig Commission), an eight-member investigatory body created by the government of Patricio Aylwin Azócar (1990-94), the armed forces and security forces were responsible for the deaths of 2,115 Chileans in the years following the 1973 coup, as well as the systematic torture or imprisonment of thousands of other opponents of the Pinochet regime.
Beginning with the Allende government and continuing with the military regime of General Pinochet (1973-90), Chile underwent two decades of social, economic, and political restructuring. As political scientist Arturo Valenzuela points out in the "Government and Politics" chapter, the Pinochet regime, ironically, proved to be "the longest and most revolutionary government in the nation's history." Although the Pinochet regime adopted a system of local government administration based on corporatism (see Glossary), it avoided the corporatist economic policies often associated with authoritarian military rulers and favored by Chile's industrial bourgeoisie and landowning class. Instead, Pinochet listened to economic guidance offered by students of the University of Chicago's Milton Friedman, a spokesman for monetarists (see Glossary). This connection developed because of the Catholic University of Chile's exchange program with the University of Chicago, whose Chilean graduates won Pinochet's ear. Determined to transform Chile's statist economy, Pinochet embraced the free- market, export-oriented economic model recommended by the so-called "Chicago boys" (see Glossary). These policies called for integrating the Chilean economy into the world economy, privatizing nationalized industries as well as the social security and health sectors, sharply reducing the number of public employees, adopting monetarist policies, deregulating the labor market, and carrying out a sweeping tax reform, among other measures.
By the late 1980s, the Chilean economy was again booming, and other developing countries were looking to it as an economic model. The regime's drive to privatize was an important indicator of the transition to a market economy. Of about 550 firms under state control in the 1970s, fewer than fifty remained so by the end of 1991. Whether Chile's structural transformations could have been carried out by a democratic government is unclear. By the early 1990s, Argentina's democratically elected president, Carlos Saul Menem, had achieved comparable reforms without sacrificing democracy or human rights. However, the success of the Pinochet model in Chile probably had less to do with authoritarianism per se than it did with the authoritarian implementation of antistatist, free-market policies.
Fortunately for the future of Chilean democracy, Pinochet was unable to carry out his plan to permanently abolish traditional political parties and institutions and continue ruling as Chile's president for most of the 1990s. His mistake (and Chile's gain) was to hold a plebiscite on a key provision of the Pinochet constitution, which voters had approved on September 11, 1980. The 1980 constitution provided for the gradual restoration of democracy by 1989, but it would have extended Pinochet's presidency through most of the 1990s. An overconfident Pinochet proceeded with the constitutionally mandated plebiscite on October 5, 1988, and was shocked when nearly 55 percent of registered voters indicated their preference for open elections in late 1989, while only 43 percent voted for allowing Pinochet to remain president through 1997. According to Arturo Valenzuela, the opposition basically outfoxed Pinochet and won the plebiscite "following Pinochet's rules."
Aylwin, a Christian Democrat, easily won the long-awaited presidential election on December 14, 1989, as the candidate of the Coalition of Parties for Democracy (Concertación de Partidos por la Democracia--CPD), winning 55.2 percent of the vote. In concurrent congressional elections, the CPD also won a majority of elected seats in both houses of Congress. However, the coalition was unable to offset the nine Pinochet-designated senators, making the CPD's plans to further reform the military-designed constitution unattainable for the foreseeable future.
When Aylwin (1990-94) took office as president on March 11, 1990, he inherited one of the strongest economies in Latin America, although the gross domestic product ( GDP--see Glossary) growth rate in 1990 was only 2.1 percent. In addition to continuing Pinochet's free-market policies, Aylwin enhanced the former regime's foreign trade policy by further reducing import tariffs from 15 percent to 11 percent. Whereas the free-market policies adopted by Uruguay in 1990 met with strong resistance from a population accustomed to a generous cradle-to-grave welfare system, in Chile similar policies met with support from all sectors of society. Chile emerged not only as a showcase of a successful transition to moderate democratic government but also as a widely admired economic model for the developing world, achieving a GDP growth rate of 5.5 percent in 1991, with an unemployment rate of only 6.5 percent, and an unprecedented 9 percent GDP growth rate in 1992. The GDP growth rate reportedly slowed to about 5.5 percent in 1993, but the economy remained strong. In 1993 unemployment was only 5 percent, and inflation was down to 12 percent. Moreover, thanks to the economic policy of President Aylwin's minister of finance, Alejandro Foxley Riesco, total investment in Chile in 1993 was an impressive 27 percent of GDP, while Chile invested a comparable percentage of its GDP in other countries, including Argentina.
Chile's economic reforms had their downside. As Samuel Valenzuela points out, the Pinochet regime's social and economic policies led to increased socioeconomic inequalities, and urban and rural poverty remained extensive. The severe structural transformations, combined with the two harsh recessions and high debt-service obligations, aggravated the already high inequality of income distribution. More than 40 percent of the population, or about 5 million Chileans, remained poor, with 1 million of them living in extreme poverty (see Glossary). According to Chilean sociologists Cristóbal Kay and Patricio Silva, who was health undersecretary in the early 1990s, extreme poverty still affected nearly 55 percent of the rural population in 1990. The standard of living of many Chileans was further reduced by the declining quality of schooling and health care and inadequate land reform. Although the regime made heavy investments in programs for the very poor, thus helping to lower the infant mortality rate and raise life expectancy, its land reform measures were not particularly effective. Chile in 1987 remained in the category of countries with high inequality in the distribution of landholdings, with a Gini coefficient (see Glossary) of 0.64, according to the United Nations Development Programme.
The Aylwin government funneled at least 20 percent more resources into social programs, such as education, housing, and health, by raising taxes and seeking foreign assistance. Under the Aylwin government, the income of the lowest quintile of the population increased by 30 percent in 1990-93. By 1992 the proportion of Chileans living in poverty had decreased to 33 percent, from 45 percent in 1985. This amounted to 4.2 million Chileans living in poverty in 1993, with 1.2 million living in extreme poverty.
The Aylwin government also continued the privatization of social security, begun by the military regime in 1981. By the end of Aylwin's term, Chile's pension reform was the envy of the world. Officials from developing as well as developed nations were visiting Chile to see how it was done. By 1994 the system was managing assets of US$19.2 billion, giving Chile a savings rate similar to some Asian nations. Thanks in large part to its pension fund, Chile now has a strong capital market consisting of stocks, bonds, and other financial instruments.
As a democratic political model, the Aylwin government had a major handicap, namely the military, which, according to Arturo Valenzuela, has served as a virtual autonomous power within the government. With the help of its rightist allies in Congress, the military demonstrated its influence by derailing the Aylwin government's cautious but determined attempts to prosecute military officers for past human rights abuses. Aylwin refused to support the enactment of a blanket amnesty law, such as the one approved by Uruguay's General Assembly for military officers accused of human rights abuses committed between 1973 and 1978.
The military's rightist allies in Congress also thwarted the Aylwin government's attempts to enact reforms, such as one that would have eliminated the designated senators and another that would have replaced the military-designed binomial electoral system (see Glossary) with a system of proportional representation. Despite his setbacks in enacting reforms, Aylwin made good use of the strong presidential powers provided by the Pinochet-designed constitution. For example, he succeeded in enacting a constitutional reform law restoring the country's tradition of elected local governments and another limiting the power of the military courts to trying only those military personnel on active duty.
Aylwin's generally very successful presidency, particularly his handling of the economy, assured a continuation of democratic government under another politically moderate president, especially the well-regarded son of Eduardo Frei Montalva (1964-70), one of Chile's most respected presidents. Eduardo Frei Ruiz-Tagle entered politics only in 1989, when he ran successfully for a Senate seat from Santiago. Until the late 1980s, he had devoted his career to hydrology as a partner in Sigdo Koppers, an engineering firm. He was elected PDC president in 1991, winning 70 percent of the vote. Although a consensus candidate for the PDC presidency, Frei was particularly favored by the PDC's right-wing faction, popularly known as the guatones (fat men). The party's other factions- -the left-wing's chascones (bushy-haired men) and the center's renovadores (renewalists)--favored other candidates.
On May 23, 1993, Frei defeated his Socialist Party (Partido Socialista) rival, Ricardo Lagos Escobar, to obtain the CPD's presidential nomination, with a lopsided vote of 60 percent to 38 percent. Thanks in part to Aylwin's strong performance in the social, economic, and political areas, in part to Frei's political inheritance, and in part to continued divisiveness among the rightist parties, there was never any doubt that Frei would win. As chairman of the Senate's key Finance and Budget Committee, Frei earned a reputation as a fiscal moderate. His positive public rating, according to a Center for Public Studies (Centro de Estudios Públicos--CEP)-Adimark poll of July 1993, was a remarkable 75 percent, even higher than Aylwin's 73 percent positive rating.
Indeed, Frei's coalition easily won the presidential election on December 11, 1993, with nearly 58 percent of the vote, compared with 24 percent for Arturo Alessandri Besa, Frei's closest challenger and candidate of the newly formed center-right coalition called the Union for the Progress of Chile (Unión por el Progreso de Chile). Frei received the largest popular mandate of any Chilean leader since 1931. The election was a sort of reverse replay of the 1958 election, when Frei's father was defeated by Alessandri's uncle, Jorge Alessandri Rodríguez (president, 1958-64). Moreover, Frei Ruiz-Tagle allied himself with the PS, whereas his father joined in an alliance with the right, specifically the National Party (Partido Nacional). In sharp contrast to the presidential elections of September 4, 1970, the unexciting elections of December 11, 1993, lacked left-wing and right-wing rhetoric. The vast majority of Chileans, enjoying Latin America's strongest economy, were apparently content to let the government remain in the hands of the political center, namely Frei Montalva's son. Although Frei Ruiz-Tagle, unlike his late father, is not distinguished for his public oratory, Chileans regarded his low- key, nonconfrontational, and statesmanlike campaigning style, as well as his penchant for consensus-building, as positive traits.
Frei Ruiz-Tagle appears to have a better chance than Aylwin had to make the executive stronger vis-a-vis the military, not only because of his powerful mandate but also because the political right is becoming less protective of the military's prerogatives within the military-designed political system. Nevertheless, daunting challenges in the form of military resistance face Frei in his plans to seek to amend the Pinochet-era constitution. These plans include abolishing the eight "designated" Senate seats, reforming the electoral system, and making the army commander, General Pinochet, and the other military commanders accountable to elected officials. Frei's political agenda also includes less politically sensitive goals, such as improving secondary and higher education, consolidating Chile's political democracy, modernizing public services, and giving priority to rural development and eradication of poverty.
On the foreign front, Frei appeared to be inclined to reverse Chile's disinterest in regional trade pacts. In particular, his government was reassessing the potential benefits of joining the Southern Cone Common Market (Mercado Común del Cono Sur-- Mercosur; see Glossary) and expected that Chile would become an associate member by January 1995. After the United States Congress ratified the North American Free Trade Agreement ( NAFTA--see Glossary) in November 1993, Chile began lobbying to join a similar agreement with the United States (one which would drop the "North" from NAFTA), citing President Bill Clinton's position that Chile is "next in line" to join NAFTA. Total bilateral trade between Chile and the United States amounted to US$4.1 billion in 1993.
Frei's coalition maintained a majority (seventy) of the 120 seats in the lower house of Congress, the Chamber of Deputies, but fell short of the eighty it needed for a two-thirds voting bloc. Its lack of majority support in the forty-six-member Senate also seemed to preclude passage of constitutional amendments, which require a three-fifths majority in both houses. Like its predecessor, the Frei government's efforts are likely to be hampered by the nine nonelected senators appointed by the Pinochet regime (of whom only eight are still serving) and by the binomial electoral system, which the military adopted for the 1989 elections in order to strengthen the hand of the rightists.
Furthermore, unlike Chile's pre-coup democracy, its democracy of the 1990s is expected to remain fettered by a military with a strong institutional role in government, a military that will not likely tolerate a departure from the economic policies that constitute the principal accomplishment of its seventeen years in power. Even Frei's stated intention to push legislation to relieve the Copper Corporation (Corporación del Cobre--Codelco) of its constitutional obligation to give the armed forces 10 percent of its annual earnings entails a risk of antagonizing the military. In 1993 this contribution amounted to US$190 million, almost one-fifth of the total defense budget. However, one casualty of a financial scandal at Codelco that broke in January 1994 could be the army. The copper unions asked the army to give up its 10 percent share of Codelco's annual sales as a patriotic gesture. Although the army ignored this request, Congress was planning to discuss military spending later in the year, leaving open the possibility that the army could be compelled to make the sacrifice to head off additional budget cuts.
Frei's relations with the military may determine how successful he is in achieving his stated objectives, but confrontation with the military did not appear to be his style. Indeed, in his address to Congress on May 21, 1994, Frei avoided the most controversial issue, his lack of power to appoint or dismiss the military commanders. The only feasible resolution of the dilemma of Pinochet's continuing influence in government may need to await the general's scheduled retirement in 1997. Even then, however, Chile's transition to democracy will not be fully consolidated until reform of constitutional anachronisms, such as the immunity of military commanders to presidential dismissal, the binomial electoral system, and the designated senators.
August 31, 1994
Rex A. Hudson
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Chapter 1. Historical Setting
FROM ONE OF THE MOST neglected outposts of the Spanish Empire, Chile developed into one of the most prosperous and democratic nations in Latin America. Throughout its history, however, Chile has depended on great external powers for economic exchange and political influence: Spain in the colonial period, Britain in the nineteenth century, and the United States in the twentieth century.
Chile's dependence is made most evident by the country's heavy reliance on exports. These have included silver and gold in the colonial period, wheat in the mid-nineteenth century, nitrates up to World War I, copper after the 1930s, and a variety of commodities sold overseas in more recent years. The national economy's orientation toward the extraction of primary products has gone hand in hand with severe exploitation of workers. Beginning with the coerced labor of native Americans during the Spanish conquest, the exploitation continued with mestizo (see Glossary) peonage on huge farms in the eighteenth and nineteenth centuries and brutal treatment of miners in the north in the first decade of the twentieth century. The most recent victimization of workers occurred during the military dictatorship of Augusto Pinochet Ugarte (1973-90), when unions were suppressed and wages were depressed, unemployment increased, and political parties were banned.
Another persistent feature of Chile's economic history has been the conflict over land in the countryside, beginning when the Spaniards displaced the indigenous people during their sixteenthcentury conquest. Later chapters of this struggle have included the expansion of the great estates during the ensuing four centuries and the agrarian reform efforts of the 1960s and 1970s.
Politically, Chile has also conformed to several patterns. Since winning independence in 1818, the nation has had a history of civilian rule surpassed by that of few countries in the world. In the nineteenth century, Chile became the first country in Latin America to install a durable constitutional system of government, which encouraged the development of an array of political parties. Military intervention in politics has been rare in Chile, occurring only at times of extraordinary social crisis, as in 1891, 1924, 1925, 1932, and 1973. These interventions often brought about massive transformations; all the fundamental changes in the Chilean political system and its constitutions have occurred with the intervention of the armed forces, acting in concert with civilian politicians.
From 1932 to 1973, Chile built on its republican tradition by sustaining one of the most stable, reformist, and representative democracies in the world. Although elitist and conservative in some respects, the political system provided for the peaceful transfer of power and the gradual incorporation of new contenders. Undergirding that system were Chile's strong political parties, which were often attracted to foreign ideologies and formulas. Having thoroughly permeated society, these parties were able to withstand crushing blows from the Pinochet regime of 1973-90.
Republican political institutions were able to take root in Chile in the nineteenth century before new social groups demanded participation. Contenders from the middle and lower classes gradually were assimilated into an accommodating political system in which most disputes were settled peacefully, although disruptions related to the demands of workers often met a harsh, violent response. The system expanded to incorporate more and more competing regional, anticlerical, and economic elites in the nineteenth century. The middle classes gained political offices and welfare benefits in the opening decades of the twentieth century. From the 1920s to the 1940s, urban laborers obtained unionization rights and participated in reformist governments. In the 1950s, women finally exercised full suffrage and became a decisive electoral force. And by the 1960s, rural workers achieved influence with reformist parties, widespread unionization, and land reform.
As the political system evolved, groups divided on either side of six main issues. The first and most important in the nineteenth century was the role of the Roman Catholic Church in political, social, and economic affairs. Neither of the two major parties, the Conservative Party and the Liberal Party, opposed the practice of Catholicism. However, the Conservatives defended the church's secular prerogatives; the Liberals (and later the Nationals, Radicals, Democrats, and Marxists) took anticlerical positions.
The second source of friction was regionalism, although less virulent than in some larger Latin American countries. In the north and south, reform groups became powerful, especially the Conservatives holding sway in Chile's Central Valley (Valle Central), who advocated opposition to the establishment. Regional groups made a significant impact on political life in Chile: they mobilized repeated rebellions against the central government from the 1830s through the 1850s; helped replace a centralizing president with a political system dominated by the National Congress (hereafter, Congress) and local bosses in the 1890s; elected Arturo Alessandri Palma (1920-24, 1925, 1932-38) as the chief executive representing the north against the central oligarchy in 1920; and cast exceptional percentages of their ballots for reformist and leftist candidates (especially Radicals, Communists, and Socialists) from the 1920s to the 1970s. Throughout the twentieth century, leaders outside Santiago also pleaded for administrative decentralization until the Pinochet government devolved greater authority on provincial and municipal governments and even moved Congress from Santiago to Valparaíso.
The third issue dividing Chileans--social class--grew in importance from the nineteenth century to the twentieth century. Although both the Conservatives and the Liberals represented the upper stratum, in the nineteenth century the Radicals began to speak on behalf of many in the middle class, and the Democrats built a base among urban artisans and workers. In the twentieth century, the Socialists and Communists became the leaders of organized labor. Along with the Christian Democratic Party, these parties attracted adherents among impoverished people in the countryside and the urban slums.
In the twentieth century, three other issues became salient, although not as significant as divisions over social class, regionalism, or the role of the church. One was the cleavage between city and country, which was manifested politically by the leftist parties' relative success in the urban areas and by the rightist groups in the countryside. Another source of strife was ideology; most Chilean parties after World War I sharply defined themselves in terms of programmatic and philosophical differences, often imported from abroad, including liberalism, Marxism, corporatism (see Glossary), and communitarianism (see Glossary). Gender also became a political issue and divider. After women began voting for president in 1952, they were more likely than men to cast ballots for rightist or centrist candidates.
As Chile's political parties grew, they attracted followers not only on the basis of ideology but also on the basis of patronclient relationships between candidates and voters. These ties were particularly important at the local level, where mediation with government agencies, provision of public employment, and delivery of public services were more crucial than ideological battles waged on the national stage. Over generations, these bonds became tightly woven, producing within the parties fervent and exclusive subcultures nurtured in the family, the community, and the workplace. As a result, by the mid-twentieth century the parties had politicized schools, unions, professional associations, the media, and virtually all other components of national life. The intense politicization of modern Chile has its roots in events of the nineteenth century.
During the colonial period and most of the twentieth century, the central state played an active role in the economy until many of its functions were curtailed by the military government of General Pinochet. State power was highly centralized from the 1830s to the 1970s, to the ire of the outlying provinces.
Although normally governed by civilians, Chile has been militaristic in its dealings with native people, workers, and neighboring states. In the twentieth century, it has been a supporter of arbitration in international disputes. In foreign policy, Chile has long sought to be the strongest power on the Pacific Coast of South America, and it has always shied away from diplomatic entanglements outside the Americas.
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PRECOLUMBIAN CIVILIZATIONS
At the time the Spanish arrived, a variety of Amerindian societies inhabited what is now Chile. No elaborate, centralized, sedentary civilization reigned supreme, even though the Inca Empire had penetrated the northern land of the future state. As the Spaniards would after them, the Incas encountered fierce resistance from the indigenous Araucanians, particularly the Mapuche tribe, and so did not exert control in the south. During their attempts at conquest in 1460 and 1491, the Incas established forts in the Central Valley of Chile, but they could not colonize the region. In the north, the Incas were able to collect tribute from small groups of fishermen and oasis farmers but were not able to establish a strong cultural presence.
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 language. 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.
The Araucanians, especially those in the south, became famous for their staunch resistance to the seizure of their territory. Scholars speculate that their total 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. Of the three Araucanian groups, the one that mounted the most resistance to the Spanish was the Mapuche, meaning "people of the land."
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CONQUEST AND COLONIZATION, 1535-1810
Politics and War in a Frontier Society
Chile's first known European discoverer, Ferdinand Magellan, stopped there during his voyage on October 21, 1520. A concerted attempt at colonization began when Diego de Almagro, a companion of conqueror Francisco Pizarro, headed south from Peru in 1535. Disappointed at the dearth of mineral wealth and deterred by the pugnacity of the native population in Chile, Almagro returned to Peru in 1537, where he died in the civil wars that took place among the conquistadors.
The second Spanish expedition from Peru to Chile was begun by Pedro de Valdivia in 1540. Proving more persistent than Almagro, he founded the capital city of Santiago on February 12, 1541. Valdivia managed to subdue many northern Amerindians, forcing them to work in mines and fields. He had far less success with the Araucanians of the south, however.
Valdivia (1541-53) became the first governor of the captaincy general of Chile, which was the colonial name until 1609. 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 cabildos administered local municipalities, the most important of which was Santiago, which was the seat of a royal audiencia (see Glossary) from 1609 until the end of colonial rule.
Seeking more precious metals and slave labor, Valdivia established fortresses farther south. Being so scattered and small, however, they proved difficult to defend against Araucanian attack. Although Valdivia found small amounts of gold in the south, he realized that Chile would have to be primarily an agricultural colony.
In December 1553, an Araucanian army of warriors, organized by the legendary Mapuche chief Lautaro (Valdivia's former servant), assaulted and destroyed the fort of Tucapel. Accompanied by only fifty soldiers, Valdivia rushed to the aid of the fort, but all his men perished at the hands of the Mapuche in the Battle of Tucapel. Valdivia himself fled but was later tracked down, tortured, and killed by Lautaro. Although Lautaro was killed by Spaniards in the Battle of Mataquito in 1557, his chief, Caupolicán, continued the fight until his capture by treachery and his subsequent execution by the Spaniards in 1558. The uprising of 1553-58 became the most famous instance of Araucanian resistance; Lautaro in later centuries became a revered figure among Chilean nationalists. It took several more years to suppress the rebellion. Thereafter, the Araucanians no longer threatened to drive the Spanish out, but they did destroy small settlements from time to time. Most important, the Mapuche held on to their remaining territory for another three centuries.
Despite inefficiency and corruption in the political system, Chileans, like most Spanish Americans, exhibited remarkable loyalty to crown authority throughout nearly three centuries of colonial rule. Chileans complained about certain policies or officials but never challenged the regime. It was only when the king of Spain was overthrown at the beginning of the nineteenth century that Chileans began to consider self-government.
Chileans resented their reliance on Peru for governance, trade, and subsidies, but not enough to defy crown authority. Many Chilean criollos (creoles, or Spaniards born in the New World) also resented domination by the peninsulares (Spaniards, usually officials, born in the Old World and residing in an overseas colony), especially in the sinecures of royal administration. However, local Chilean elites, especially landowners, asserted themselves in politics well before any movement for independence. Over time, these elites captured numerous positions in the local governing apparatus, bought favors from the bureaucracy, co-opted administrators from Spain, and came to exercise informal authority in the countryside.
Society in Chile was sharply divided along ethnic, racial, and class lines. Peninsulares and criollos dominated the tiny upper class. Miscegenation between Europeans and the indigenous people produced a mestizo population that quickly outnumbered the Spaniards. Farther down the social ladder were a few African slaves and large numbers of native Americans.
The Roman Catholic Church served as the main buttress of the government and the primary instrument of social control. Compared with its counterparts in Peru and Mexico, the church in Chile was not very rich or powerful. On the frontier, missionaries were more important than the Catholic hierarchy. Although usually it supported the status quo, the church produced the most important defenders of the indigenous population against Spanish atrocities. The most famous advocate of human rights for the native Americans was a Jesuit, Luis de Valdivia (no relation to Pedro de Valdivia), who struggled, mostly in vain, to improve their lot in the period 1593-1619.
Cut off to the north by desert, to the south by the Araucanians, to the east by the Andes Mountains, and to the west by the ocean, Chile became one of the most centralized, homogeneous colonies in Spanish America. Serving as a sort of frontier garrison, the colony found itself with the mission of forestalling encroachment by Araucanians and by Spain's European enemies, especially the British and the Dutch. In addition to the Araucanians, buccaneers and English adventurers menaced the colony, as was shown by Sir Francis Drake's 1578 raid on Valparaíso, the principal port. Because Chile hosted one of the largest standing armies in the Americas, it was one of the most militarized of the Spanish possessions, as well as a drain on the treasury of Peru.
Throughout the colonial period, the Spaniards engaged in frontier combat with the Araucanians, who controlled the territory south of the Río Bío-Bío (about 500 kilometers south of Santiago) and waged guerrilla warfare against the invaders. During many of those years, the entire southern region was impenetrable by Europeans. In the skirmishes, the Spaniards took many of their defeated foes as slaves. Missionary expeditions to Christianize the Araucanians proved risky and often fruitless.
Most European relations with the native Americans were hostile, resembling those later existing with nomadic tribes in the United States. The Spaniards generally treated the Mapuche as an enemy nation to be subjugated and even exterminated, in contrast to the way the Aztecs and the Incas treated the Mapuche, as a pool of subservient laborers. Nevertheless, the Spaniards did have some positive interaction with the Mapuche. Along with warfare, there also occurred some miscegenation, intermarriage, and acculturation between the colonists and the indigenous people.
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The Colonial Economy
The government played a significant role in the colonial economy. It regulated and allocated labor, distributed land, granted monopolies, set prices, licensed industries, conceded mining rights, created public enterprises, authorized guilds, channeled exports, collected taxes, and provided subsidies. Outside the capital city, however, colonists often ignored or circumvented royal laws. In the countryside and on the frontier, local landowners and military officers frequently established and enforced their own rules.
The economy expanded under Spanish rule, but some criollos complained about royal taxes and limitations on trade and production. Although the crown required that most Chilean commerce be with Peru, smugglers managed to sustain some illegal trade with other American colonies and with Spain itself. Chile exported to Lima small amounts of gold, silver, copper, wheat, tallow, hides, flour, wine, clothing, tools, ships, and furniture. Merchants, manufacturers, and artisans became increasingly important to the Chilean economy.
Mining was significant, although the volume of gold and silver extracted in Chile was far less than the output of Peru or Mexico. The conquerors appropriated mines and washings from the native people and coerced them into extracting the precious metal for the new owners. The crown claimed one-fifth of all the gold produced, but the miners frequently cheated the treasury. By the seventeenth century, depleted supplies and the conflict with the Araucanians reduced the quantity of gold mined in Chile.
Because precious metals were scarce, most Chileans worked in agriculture. Large landowners became the local elite, often maintaining a second residence in the capital city. Traditionally, most historians have considered these great estates (called haciendas or fundos) inefficient and exploitive, but some scholars have claimed that they were more productive and less cruel than is conventionally depicted.
The haciendas initially depended for their existence on the land and labor of the indigenous people. As in the rest of Spanish America, crown officials rewarded many conquerors according to the encomienda (see Glossary) system, by which a group of native Americans would be commended or consigned temporarily to their care. The grantees, called encomenderos, were supposed to Christianize their wards in return for small tribute payments and service, but they usually took advantage of their charges as laborers and servants. Many encomenderos also appropriated native lands. Throughout the sixteenth and seventeenth centuries, the encomenderos fended off attempts by the crown and the church to interfere with their exploitation of the indigenous people.
The Chilean colony depended heavily on coerced labor, whether it was legally slave labor or, like the wards of the encomenderos, nominally free. Wage labor initially was rare in the colonial period; it became much more common in the eighteenth and nineteenth centuries. Because few native Americans or Africans were available, the mestizo population became the main source of workers for the growing number of latifundios (see Glossary), which were basically synonymous with haciendas.
Those workers attached to the estates as tenant farmers became known as inquilinos. Many of them worked outside the cash economy, dealing in land, labor, and barter. The countryside was also populated by small landholders (minifundistas), migrant workers (afuerinos), and a few Mapuche holding communal lands (usually under legal title).
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WARS OF INDEPENDENCE, 1810-18
Aristocratic Chileans began considering independence only when the authority and legitimacy of the crown were cast in doubt by Napoleon Bonaparte's invasion of Spain in 1807. Napoleon replaced the Spanish king with his brother, Joseph Bonaparte. On the peninsula, Spanish loyalists formed juntas that claimed they would govern both the motherland and the colonies until the rightful king was restored. Thus, Chileans, like other Spanish Americans, had to confront the dilemma of who was in charge in the absence of the divine monarch: the French pretender to the throne, the Spanish rebels, or local leaders. The latter option was tried on September 18, 1810, a date whose anniversary is celebrated as Chile's independence day. On that day, the criollo leaders of Santiago, employing the town council as a junta, announced their intention to govern the colony until the king was reinstated. They swore loyalty to the ousted monarch, Ferdinand VII, but insisted that they had as much right to rule in the meantime as did subjects of the crown in Spain itself. They immediately opened the ports to all traders.
Chile's first experiment with self-government, the Old Fatherland (Patria Vieja, 1810-14), was led by José Miguel Carrera Verdugo (president, 1812-13), an aristocrat in his mid-twenties. The military-educated Carrera was a heavy-handed ruler who aroused widespread opposition. One of the earliest advocates of full independence, Bernardo O'Higgins Riquelme, 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 and many of the Chilean rebels escaped to Argentina.
During the Reconquest (La Reconquista) of 1814-17, the harsh rule of the Spanish loyalists, who punished suspected rebels, drove more Chileans into the insurrectionary camp. More and 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.
When criollos sang the praises of equality and freedom, however, they meant equal treatment for themselves in relation to the peninsulares and liberation from Spanish rule, not equality or freedom for the masses of Chileans. The criollos wanted to assume leadership positions previously controlled by peninsulares without upsetting the existing social and economic order. In that sense, 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.
In exile in Argentina, O'Higgins joined forces with José de San Martín, whose army freed Chile with a daring assault over the Andes in 1817, defeating the Spaniards at the Battle of Chacabuco on February 12. 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 (see Genesis of the Armed Forces, 1814-36 , ch. 5).
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CIVIL WARS, 1818-30
From 1817 to 1823, Bernardo O'Higgins ruled Chile as supreme director (president). 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 Serrano, 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 Díaz, 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--see Glossary) 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.
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ARISTOCRATIC REPUBLICANISM, 1830-91
Scholars have long pondered why Chile was the first country in Latin America to achieve stable civilian rule in a constitutional, electoral, representative republic. They have also asked why Chile was more successful at constitutional government thereafter than its neighbors. One part of the answer is that Chile had fewer obstacles to overcome because it was less disturbed by regional, church-state, and ethnic conflicts. The geographically compact and relatively homogeneous population was easier to manage than the far-flung groups residing in many of the other new states of the hemisphere. As the nineteenth century wore on, slow settlement of the frontiers to the north and south provided a safety valve without creating a challenge to the dominance of the Central Valley.
As with regionalism, the church issue that rent many of the new republics was also muted in Chile, where the Catholic Church had never been very wealthy or powerful. Some historians would also argue that Chilean criollos, because they lived on the fringe of the empire, had more experience at self-government during the colonial period. In addition, the Chilean elite was less fearful than many other Spanish Americans that limited democracy would open the door to uprisings by massive native or black subject classes. At the same time, the ruling class was cohesive and confident, its members connected by familial and business networks. The elite was powerful partly because it controlled the main exports, until foreigners took over trade late in the nineteenth century. The rapid recovery of the export economy from the devastation of the wars of independence also helped, as economic and political success and stability became mutually reinforcing. Capitalizing on these advantages, however, would require shrewd and ruthless political engineers, victory in a war against Chile's neighbors, continued economic growth, and some luck in the design, timing, and sequence of political change.
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The Conservative Era, 1830-61
Members of the first political parties, the Conservatives (pelucones, or bigwigs) and the Liberals (pipiolos, or novices), began to coalesce around the church-state issue. Not only more favorably inclined toward the church, the Conservatives were also more sympathetic than the Liberals toward the colonial legacy, authoritarian government, the supremacy of executive powers, and a unitary state. After their victory at the Battle of Lircay, the Conservatives took charge, spearheaded by a Valparaíso merchant, Diego Portales Palazuelos.
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The Portalian State, 1830-37
Although never president, 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. In later years, conservative Chileans canonized Portales as a symbol of order and progress, exaggerating the importance of one man in that achievement.
The "Portalian State" was institutionalized by the 1833 constitution. 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 Vial, 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 y Calahumana 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. When a Chilean colonel who opposed the war killed Portales in 1837, this act and the suspicion that Peruvians were involved in the assassination plot inspired an even greater war effort by the government.
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Two Conservative Presidencies, 1841-61
Chile defeated the Peruvian fleet at Casma on January 12, 1839, and the Bolivian army at Yungay, Peru, on January 20. These Chilean victories destroyed the Peru-Bolivia Confederation, made Chile lord of the west coast, brought unity and patriotism to the Chilean elites, and gave Chile's armed forces pride and purpose as a military with an external mission. The successful war also helped convince the European powers and the United States to respect Chile's coastal sphere of influence. Subsequently, the country won additional respect from the European powers and the United States by giving them economic access and concessions, by treating their citizens well, and by generally playing them off against each other.
Since its inception, the Portalian State has been criticized for its authoritarianism. But it has also been praised for the stability, prosperity, and international victories it brought to Chile, as well as the gradual opening to increased democracy that it provided. At least in comparison with most other regimes of the era, the Portalian State was noteworthy for being dominated by constitutional civilian authorities. Although Portales deserves some credit for launching the system, his successors were the ones who truly implemented, institutionalized, legitimized, and consolidated it. From 1831 to 1861, no other country in Spanish America had such a regular and constitutional succession of chief executives.
Manuel Bulnes Prieto (president, 1841-51), hero of the victories over the Chilean Liberals at the Battle of Lircay in 1830, and over the Bolivian army at Yungay in 1839, became president in 1841. As a decorated general, he was the ideal choice to consolidate the Portalian State and establish presidential control over the armed forces. He reduced the size of the military and solidified its loyalty to the central government in the face of provincial uprisings. As a southerner, he was able to defuse regional resentment of the dominant Santiago area. Although Bulnes staffed his two administrations mainly with Conservatives, he conciliated his opponents by including a few Liberals. He strengthened the new political institutions, especially Congress and the judiciary, and gave legitimacy to the constitution by stepping down at the end of his second term in office. Placing the national interest above regional or military loyalties, he also helped snuff out a southern rebellion against his successor.
Intellectual life blossomed under Bulnes, thanks in part to the many exiles who came to Chile from less stable Spanish American republics. They clustered around the University of Chile (founded in 1842), which developed into one of the most prestigious educational institutions in Latin America. Both foreigners and nationals formed the "Generation of 1842," led mainly by liberal intellectuals and politicians such as Francisco Bilbao Barguin and José Victorino Lastarria Santander. Through the Society of Equality, members of the group called for expanded democracy and reduced church prerogatives. In particular, they defended civil liberties and freedom of the press, seeking to constrain the government's authoritarian powers.
Bulnes presided over continued prosperity, as production from the farms and mines increased, both for external and for internal consumption. In response to foreign demand, especially for wheat during the California and Australia gold rushes, agricultural exports increased. Instead of importing scarce and expensive modern capital and technology, landowners expanded production. They did this primarily by enlarging their estates and absorbing more peasants into their work forces, especially in the central provinces, where the vast majority of Chileans toiled in agriculture. This expansion fortified the hacienda system and increased the numbers of people attached to it. The growth of the great estates also increased the political power of the landed elites, who succeeded in exercising a veto over agrarian reform for a century.
In the mid-1800s, the rural labor force, mainly mestizos, was a cheap and expanding source of labor. More and more of these laborers became tenant farmers (inquilinos). For a century thereafter, many workers would remain bound to the haciendas through tradition, lack of alternatives, and landowner collusion and coercion. Itinerant rural workers and even small landowners became increasingly dependent on the great estates, whether through part-time or full-time work. The landed elites also inhibited industrialization by their preference for free trade and the low wages they paid their workers, which hindered rural consumers from accumulating disposable income. For a century, the lack of any significant challenge to this exploitive system was one of the pillars of the social and political hierarchy.
Liberals and regionalists unsuccessfully took up arms against Bulnes's conservative successor, Manuel Montt Torres (president, 1851-61). Thousands died in one of the few large civil wars in nineteenth-century Chile. The rebels of 1851 denounced Montt's election as a fraud perpetrated by the centralist forces in and around Santiago. Some entrepreneurs in the outlying provinces also backed the rebellion out of anger at the government's neglect of economic interests outside the sphere of the central landowning elites. Montt put down the uprising with help from British commercial ships.
From 1851 to 1861, Montt completed the construction of the durable constitutional order begun by Portales and Bulnes. By reducing church prerogatives, Montt eased the transition from a sequence of Conservative chief executives to a series of Liberals. As a civilian head of state, he was less harsh with his liberal adversaries. He also promoted conciliation by including many northerners as well as southerners in the government.
Benefiting from the sharp growth in exports and customs revenues in the 1850s, Montt demonstrated the efficacy of the central government by supporting the establishment of railroads, a telegraph system, and banks. He created the first government-run railroad company in South America, despite his belief in laissezfaire . He also initiated the extension of government credit to propertied groups. Under President Montt, school construction accelerated, laying the groundwork for Chile to become one of the most literate nations in the hemisphere. Expanding on the initiative started by Bulnes, Montt also pushed back the southern frontier, in part by encouraging German immigration.
As the next presidential succession approached, a second rebellion ensued in 1859. The rebels represented a diverse alliance, including Liberals who opposed the right-wing government and its encroachments on civil liberties, Conservatives who believed the president was insufficiently proclerical, politicians who feared the selection of a strongman as Montt's successor, and regionalists who chafed at the concentration of power in Santiago. Once again, Montt prevailed in a test of arms, but thereafter he conciliated his opponents by nominating a successor acceptable to all sides, José Joaquín Pérez Mascayano (president, 1861-71).
Under Bulnes and Montt, economic elites had resisted paying direct taxes, so the national government had become heavily dependent on customs duties, particularly on mineral exports. Imports were also taxed at a low level. The most important exports in the early years of independence had been silver and copper, mined mainly in the northern provinces, along with wheat, tallow, and other farm produce. The Chilean elites eagerly welcomed European and North American ships and merchants. Although these elites debated the issue of protectionism, they settled on low tariffs for revenue. Despite some dissent and deviations, the dominant policy in the nineteenth century was free trade--the exchange of raw materials for manufactured items, although a few local industries took root. Britain quickly became Chile's primary trading partner. The British also invested, both directly and indirectly, in the Chilean economy.
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The Liberal Era, 1861-91
Following Pérez's peaceful ten-year administration, Chilean presidents were prohibited from running for election to a second consecutive term by an 1871 amendment to the constitution. Pérez was succeeded as president by Federico Errázuriz Zañartu (1871-76), Aníbal Pinto Garmendia (1876-81), and Domingo Santa María González (1881-86), the latter two serving during the War of the Pacific (1879-83). All formed coalition governments in which the president juggled a complicated array of party components.
The Liberal Party (Partido Liberal--PL), the Conservative Party (Partido Conservador--PC), and the National Party (Partido Nacional--PN) were formed in 1857. Once the Liberal Party replaced the Conservative Party as the dominant party, the Liberal Party was in turn challenged from the left by the more fervent reformists of the Radical Party (Partido Radical--PR). A spin-off from the Liberal Party, the Radical Party was founded in 1861. Reformists of the Democrat Party (Partido Demócrata), which in turn splintered from the Radical Party in 1887, also challenged the Liberal Party. The National Party also vied with the Conservatives and Liberals to represent upper-class interests. Derived from the Montt presidency, the National Party took a less proclerical, more centrist position than that of the Conservatives. Party competition escalated after the electoral reform of 1874 extended the franchise to all literate adult males, effectively removing property qualifications.
Like Montt, most Liberal chief executives were centrists who introduced change gradually. Their administrations continued to make incremental cuts in church privileges but tried not to inflame that issue. Secularization gradually gained ground in education, and Santa María transferred from the church to the state the management birth, marriage, and death records.
Even during internal and external conflicts, Chile continued to prosper. When Spain attempted to reconquer Peru, Chile engaged in a coastal war (1864-66) with the Spaniards, whose warships shelled Valparaíso. Once again, Chile asserted its sway over the west coast of South America. Farming, mining, and commerce grew steadily until the world depression of the 1870s, when Chile again turned to a war against its Andean neighbors.
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War of the Pacific, 1879-83
Chile's borders were a matter of contention throughout the nineteenth century. The War of the Pacific began on the heels of an international economic recession that focused attention on resources in outlying zones. Under an 1866 treaty, Chile and Bolivia divided the disputed area encompassing the Atacama Desert at 24° south latitude (located just south of the port of Antofagasta) in the understanding that the nationals of both nations could freely exploit mineral deposits in the region. Both nations, however, would share equally all the revenue generated by mining activities in the region. But Bolivia soon repudiated the treaty, and its subsequent levying of taxes on a Chilean company operating in the area led to an arms race between Chile and its northern neighbors of Bolivia and Peru.
Fighting broke out when Chilean entrepreneurs and mine-owners in present-day Tarapacá Region and Antofagasta Region, then belonging to Peru and Bolivia, respectively, resisted new taxes, the formation of monopoly companies, and other impositions. In those provinces, most of the deposits of nitrate--a valuable ingredient in fertilizers and explosives--were owned and mined by Chileans and Europeans, in particular the British. Chile wanted not only to acquire the nitrate fields but also to weaken Peru and Bolivia in order to strengthen its own strategic preeminence on the Pacific Coast. Hostilities were exacerbated because of disagreements over boundary lines, which in the desert had always been vague. Chile and Bolivia accused each other of violating the 1866 treaty. Although Chile expanded northward as a result of the War of the Pacific, its rights to the conquered territory continued to be questioned by Peru, and especially by Bolivia, throughout the twentieth century.
War began when Chilean troops crossed the northern frontier in 1879. Although a mutual defense pact had allied Peru and Bolivia since 1873, Chile's more professional, less politicized military overwhelmed the two weaker countries on land and sea. The turning point of the war was the occupation of Lima on January 17, 1881, a humiliation the Peruvians never forgave (see War of the Pacific, 1879-83 , ch. 5). Chile sealed its victory with the 1883 Treaty of Ancón, which also ended the Chilean occupation of Lima.
As a result of the war and the Treaty of Ancón, Chile acquired two northern provinces--Tarapacá from Peru and Antofagasta from Bolivia. These territories encompassed most of the Atacama Desert and blocked off Bolivia's outlet to the Pacific Ocean (see fig. 3). The war gave Chile control over nitrate exports, which would dominate the national economy until the 1920s, possession of copper deposits that would eclipse nitrate exports by the 1930s, greatpower status along the entire Pacific Coast of South America, and an enduring symbol of patriotic pride in the person of naval hero Arturo Prat Chacón. The War of the Pacific also bestowed on the Chilean armed forces enhanced respect, the prospect of steadily increasing force levels, and a long-term external mission guarding the borders with Peru, Bolivia, and Argentina. In 1885 a German military officer, Emil Körner, was contracted to upgrade and professionalize the armed forces along Prussian lines. In subsequent years, better education produced not only a more modern officer corps but also a military leadership capable of questioning civilian management of national development (see Development of the Armed Forces , ch. 5).
After battling the Peruvians and Bolivians in the north, the military turned to engaging the Araucanians in the south. The final defeat of the Mapuche in 1882 opened up the southern third of the national territory to wealthy Chileans who quickly carved out immense estates. No homestead act or legion of family farmers stood in their way, although a few middle-class and immigrant agriculturalists moved in. Some Mapuche fled over the border to Argentina. The army herded those who remained onto tribal reservations in 1884, where they would remain mired in poverty for generations. Like the far north, these southern provinces would become stalwarts of national reform movements, critical of the excessive concentration of power and wealth in and around Santiago.
Soon controlled by British and then by United States investors, the nitrate fields became a classic monocultural boom and bust. The boom lasted four decades. Export taxes on nitrates often furnished over 50 percent of all state revenues, relieving the upper class of tax burdens. The income of the Chilean treasury nearly quadrupled in the decade after the war. The government used the funds to expand education and transportation. The mining bonanza generated demand for agricultural goods from the center and south and even for locally manufactured items, spawning a new plutocracy. Even more notable was the emergence of a class-conscious, nationalistic, ideological labor movement in the northern mining camps and elsewhere.
Prosperity also attracted settlers from abroad. Although small in number compared with those arriving in Argentina, European immigrants became an important element of the new middle class; their numbers included several future manufacturing tycoons. These arrivals came from both northern and southern Europe. People also emigrated from the Middle East, Peru, and Bolivia. Although most immigrants ended up in the cities of Chile, a minority succeeded at farming, especially in the south. In the early twentieth century, a few members of the Chilean elite tried to blame the rise of leftist unions and parties on foreign agitators, but the charge rang hollow in a country where less than 5 percent of the population had been born abroad.
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Downfall of a President, 1886-91
The controversial downfall of President José Manuel Balmaceda Fernández (1886-91) represented the only occasion when power was transferred by force between 1830 and 1924. This event resulted in the most important alteration in the constitutional system between 1833 and 1925. In many respects, the Balmaceda episode was the culmination of two trends: the growing strength of Congress in relation to the president, and the expanding influence of foreign capital in the mining zone. In essence, the rebels opposed Balmaceda's plans to expand the role of the executive branch in the political and economic systems.
Although scholars have debated whether the uprising against Balmaceda was mainly a fight over political or economic privileges, the bulk of research has supported the primacy of political over economic issues. From the 1830s to the 1880s, Congress had gradually asserted more and more authority over the budget and over cabinet ministers. Balmaceda tried to circumvent that budgetary power and break the hold of congressmen and local bosses on congressional elections.
Complaining about the heavy-handed rule of the president, and in particular his interference in congressional elections, Congress led a revolt against Balmaceda in 1891. Conservatives generally supported the rebels; Liberals and Democrats backed the president. Along with some renegade Liberals, the newly emergent Radical Party aligned with the so-called congressionalists, not wishing to see legislative prerogatives curtailed just as the party was gaining clients and strength. Those provincials resentful of the growing centralization of political and economic power in and around Santiago also backed the rebellion, especially in the north. Initially, the navy, the armed service that included the highest percentage of aristocrats, sided with the rebels; the army sided with the president.
The rebellion also attracted British entrepreneurs worried by Balmaceda's threat to encroach on the independence and revenues of the foreign-owned nitrate mines. Although not opposed to foreign investment, Balmaceda had proposed a greater role for the state and higher taxes in the mining sector. Tension mounted because nitrate sales were in a slump, a recurring problem because of the volatility of that commodity's price on international markets. The most famous British mine owner was John North, the "nitrate king," who was angry that his nitrate railroad monopoly had been terminated by Balmaceda. Although not directly involved, the United States supported Balmaceda as the legal president.
The insurgents won the bloody but brief Civil War of 1891, when the army decided not to fight the navy. As a result of the rebel victory, Congress became dominant over the chief executive and the nitrate mines increasingly fell into British and North American hands. Having gained asylum in the Argentine embassy, Balmaceda waited until the end of his legal presidential term and then committed suicide. As Portales became a legendary hero to the right, so Balmaceda was later anointed by the left as an economic nationalist who sacrificed his life in the struggle for Chilean liberation.
Already tense as a result of the civil war over Balmaceda, United States-Chilean relations deteriorated further as a result of the Baltimore incident. In late 1891, sailors from the U.S.S. Baltimore brawled with Chileans during shore leave in Valparaíso. To avert a war with an angry United States, the Chilean government apologized and paid reparations.
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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.
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. They also ignored what was called "the social question." This euphemism referred mainly to the rise of the labor movement and its demands for better treatment of the working class. Critics complained that the upper class, which had given Chile such dynamic leadership previously, had grown smug and lethargic thanks to the windfall of nitrate wealth.
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 (Partido Obrero Socialista--POS) in 1912. The founder of the POS and its best-known leader, Luis Emilio Recabarren Serrano, also founded the Communist Party of Chile (Partido Communista de Chile-- PCCh), which was formed in 1922.
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Urbanization
Beginning in the middle of the nineteenth century, Chile's cities grew rapidly. They absorbed a trickle of immigrants from abroad and then vast numbers of migrants from the Chilean countryside. Improved transportation and communications in the second half of the nineteenth century facilitated these population movements. Although Santiago led the way, smaller cities such as Valparaíso and Concepción also swelled in size.
The founding of the Industrial Development Association (Sociedad de Fomento Fabril--Sofofa) in 1883 was another indication of urbanization. It promoted industrialization long before the intense efforts of the 1930s to the 1960s. Manufacturing grew in importance in the latter decades of the nineteenth century and the opening decades of the twentieth. Most industry remained smallscale , with most of the labor performed by artisans. Protected industrialization did not become the vanguard of economic development until the period between the world wars.
The urban middle class also grew in size and became more politically assertive by the turn of the century. Whereas the economy and the society became more urban and diversified, the political system lagged behind, remaining mainly in the hands of the upper class. Nevertheless, more members of the middle class began appearing in party leadership positions, especially among the Democrats and Radicals. They were also prominent in the Chilean Student Federation (Federación de Estudiantes de Chile--FECh), based at the University of Chile. Equally important was their presence among the top commanders in the armed forces, who increasingly identified primarily with middle-class interests.
In the closing years of the nineteenth century, labor organizations gathered force, first as mutual aid societies and then increasingly as trade unions. In the opening decades of the twentieth century, labor organizing, unrest, and strikes reached new levels of intensity. In the northern nitrate and copper mines, as well as in the ports and cities, workers came together to press demands for better wages and working conditions. Attracted strongly to anarchist, anarcho-syndicalist, and socialist ideologies, they were harshly repressed during the Parliamentary Republic. The government carried out several massacres of miners in the nitrate camps; the most notorious took place in Iquique in 1907. Thus, a pattern of violent clashes between soldiers and workers took shape.
Organizational efforts in the mines and cities culminated in the creation of the first national labor confederation, the Workers' Federation of Chile (Federación Obrera de Chile--FOCh) in 1909. The organization became more radical as it grew and affiliated with the PCCh in 1922, under the leadership of Recabarren. Its greatest strength was among miners, whereas urban workers were more attracted to independent socialism or to anarchosyndicalism . The latter movement grew out of resistance societies and evolved into the Industrial Workers of the World (IWW). Unlike the FOCh, the IWW spurned ties with political parties.
The emergence of working-class demands and movements spawned the so-called social question. Intellectuals and writers began criticizing the ruling class and the Parliamentary Republic for their neglect of workers and of social ills. New census data and other studies at the beginning of the twentieth century shocked the proud Chilean elite with revelations about the extent of poverty, illiteracy, and poor health among the vast majority of the population. Especially alarming were infant mortality figures that far exceeded those of Western Europe. Realization of the squalor and anger of the working class inspired new reform efforts.
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Arturo Alessandri's Reformist Presidency, 1920-25
President Arturo Alessandri Palma (1920-24, March-October 1925, 1932-38) 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 also spoke to discontent stemming from World War I. Although Chile had been neutral, the war had disrupted the international commerce that drove the economy. German development of artificial nitrates was especially damaging, and thereafter copper would gradually surpass nitrates as the leading export, taking over conclusively in the 1930s. Inflation and currency depreciation compounded the country's economic woes.
During and after the war, the United States displaced Britain as Chile's most important external economic partner, first in trade and then in investments. American companies, led by Kennecott and Braden, took control of the production of copper and nitrates. As corporate investors, bankers, salesmen, advisers, and even entertainers, such as actor and humorist Will Rogers, came to Chile, a few Chileans began to worry about the extent of United States penetration.
As the candidate of the Liberal Alliance coalition, Alessandri barely won the presidency in 1920 in what was dubbed "the revolt of the electorate." Chilean historians consider the 1920 vote a benchmark or watershed election, along with the contests of 1938, 1970, and 1988. Like other reformers elected president in the twentieth century--Pedro Aguirre Cerda (1938-41), Gabriel González Videla (1946-52), and Salvador Allende Gossens (1970-73)-- Alessandri had to navigate skillfully through treacherous waters from the day he was elected until his inauguration, warding off attempts to deny him the fruits of victory. Mass street demonstrations by his middle- and working-class supporters convinced the conservative political elite in Congress to ratify his narrow win.
After donning the presidential sash, Alessandri 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.
In a double coup, 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 latter group was led by two colonels, Carlos Ibáñez del Campo and Marmaduke Grove Vallejo. They returned Alessandri to the presidency that March and enacted his promised reforms by decree. Many of these reforms were encapsulated in the new constitution of 1925, which was ratified in a plebiscite.
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MILITARY INTERVENTIONS, 1925-32
As in 1891 and 1973, the military intervened in national politics in the 1920s partly because of economic distress, partly to break a stalemate between the legislative and executive branches, and, above all, to change the political system. Colonel Ibáñez (president, 1927-31, 1952-58), quickly promoted to general, became the dominant power. He ruled, either behind or on the seat of power, until the economic crisis caused by the Great Depression (see Glossary) in 1931 prompted his resignation.
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The 1925 Constitution
The 1925 constitution was the second major charter in Chilean history, lasting until 1973. It codified significant changes, including the official separation of church and state, which culminated a century of gradual erosion of the political and economic power of the Roman Catholic Church. The constitution also provided legal recognition of workers' right to organize, a promise to care for the social welfare of all citizens, an assertion of the right of the state to infringe on private property for the public good, and increased powers for the now directly elected president in relation to the bicameral Congress, in particular concerning the removal of cabinet ministers, which heretofore had often been removed at the whim of the legislature.
Presidential and congressional elections were staggered so that a chief executive could not bring a legislature in on his coattails. The new constitution extended presidential terms from five to six years, with immediate reelection prohibited. It established a system of proportional representation for parties putting candidates up for Congress. The government was divided into four branches, in descending order of power: the president, the legislature, the judiciary, and the comptroller general, the latter authorized to judge the constitutionality of all laws requiring fiscal expenditures.
The Office of Comptroller General of the Republic (Oficina de la Contraloría General de la República) was designed by a United States economic adviser, Edwin Walter Kemmerer. In 1925 he also created the Central Bank of Chile (see Glossary) and the position of superintendent of banks, while putting the country on the gold standard. His reforms helped attract massive foreign investments from the United States, especially loans to the government.
Although a labor code was not finalized until 1931, several labor and social security laws enacted in 1924 would govern industrial relations from the 1930s to the 1970s. The legislation legalized unions and strikes but imposed government controls over unions. Union finances and elections were subjected to government inspection. The laws also restricted union activities and disallowed national confederations, which therefore subsequently arose outside the legal framework. Only factories with at least twenty-five workers could have an industrial union, even though approximately two-thirds of the industrial enterprises employed four or fewer workers, in effect artisans. Workers in smaller shops could form professional unions with workers of the same skill employed nearby. Agricultural unions remained virtually outlawed or extremely difficult to organize until the 1960s. The code left unions disadvantaged in their bargaining with employers and therefore reliant on political parties as allies. Those allies were crucial because the new code made the state the mediator in labormanagement disputes.
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Carlos Ibáñez's First Presidency, 1927-31
After a weak successor served in the wake of Alessandri's resignation in 1925, Ibáñez made himself president in a rigged election in 1927. He based his reign on military support (especially from the army), on repression (especially of labor unions, leftists, and political parties), and on a flood of loans from private lenders (especially from New York). He also created the national police, known as the Carabineros. His expansion of the central government found favor with the middle class. While Ibáñez promoted industry and public works, the economy fared well until torpedoed by the Great Depression.
According to the League of Nations (see Glossary), no other nation's trade suffered more than Chile's from the economic collapse. Unemployment approached 300,000, almost 25 percent of the work force. As government revenues plummeted, deficits grew. Chile suspended payments on its foreign debt in 1931 and took its currency off the gold standard in 1932. Expansion of the money supply and increased government spending thereafter generated inflation and rapid recovery. Also helpful was an emphasis on import-substitution industrialization (see Glossary) and the revival of exports, especially copper.
Rather than run the risk of civil war, Ibáñez went into exile in Argentina in July 1931 to avert clashes with demonstrators protesting his orthodox economic response to the depression and generally oppressive rule. His regime was followed by a kaleidoscope of governments, made and unmade through elections and military coups. The most notable short-lived administration was the twelve-day Socialist Republic of 1932, led by an air force commander, Marmaduke Grove, who would establish the Socialist Party (Partido Socialista--PS) in 1933. Exasperated by depression and instability, Chileans finally restored civilian rule by reelecting Alessandri to the presidency in 1932. Although the depression capsized civilian governments in most of Latin America, it discredited military rule in Chile. Now the 1925 constitution took full effect; it would remain in force until the overthrow of Salvador Allende Gossens in 1973.
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MASS DEMOCRACY, 1932-73
From 1932 to 1973, Chile was the only country in Latin America to sustain electoral democracy at a time when major Marxist parties led the workers. Its stable multiparty political system bore more resemblance to West European than to Latin American models. Chileans took great pride in their representative democracy, and many looked with contempt on their more tumultuous neighbors.
Out of the turmoil of the depression, new political forces arose that shifted the political spectrum to the left. The Conservatives and the Liberals grew closer together as the combined forces on the right, now more fearful of socialism than of their traditional enemies in the anticlerical camp. The Radicals replaced the Liberals as the swing party in the center, now that they were outflanked on the left by the growing PCCh and the Socialist Party. A small group of Catholics known as the Falange broke away from the Conservative Party in 1938 to form a new party, the National Falange (Falange Nacional). It offered a non-Marxist, centrist vision of dramatic reform, a vision that would take wing in the 1950s under the name of Christian Democracy.
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Alessandri's Second Presidency, 1932-38
Under the steady hand of the veteran Alessandri, reelected in December 1932 with 55 percent of the vote, Chile rapidly reinstated its interrupted democracy and revived its shattered economy. Although still a centrist reformer at heart, Alessandri now became the paladin of the right because the new socialist left had outflanked him. He put into practice both the 1925 constitution and the 1931 labor code; reshuffled military commands; supported a 50,000-member civilian paramilitary force, the Republican Militia (Milicia Republicana) during 1932-36 to keep the armed forces in the barracks and to threaten leftists; and cut unemployment by promoting industry and public works.
In accordance with long-standing Chilean foreign policy principles, Alessandri sought to avoid entanglement in European conflicts. He cultivated good relations with both Britain and Germany, while remaining friendly with the United States. He declared neutrality in the Spanish Civil War, as the Chilean government had done during World War I.
The Socialists, Communists, and Radicals denounced Alessandri for insufficient economic nationalism and inadequate attention to the needs of working people. Heeding the new policy of the Comintern (see Glossary), adopted in 1935, the Chilean Communists backed away from proletarian revolution, which they had advocated obediently from 1928 to 1934. Now they promoted broad, reformist electoral coalitions in the name of antifascism. With slight deviations and emendations, the PCCh sustained this accommodative approach from 1935 until 1980.
Prodded by the Communists, the Radicals and Socialists aligned in 1936 with the Confederation of Chilean Workers (Confederación de Trabajadores de Chile--CTCh), a by-product of union growth and solidarity, to forge the Popular Front. The Popular Front was given impetus by Alessandri's crushing of a railroad strike that year. The coalition also included the old Democrat Party, which was gradually supplanted by the Socialist Party until the former disappeared in the early 1940s. Similar to multiparty alliances in Europe and to populist coalitions in Latin America, the Popular Front galvanized the middle and working classes on behalf of democracy, social welfare, and industrialization. Its redistributive, populist slogan was "Bread, Roof, and Overcoat," coined by the 1932 Socialist Republic.
The Popular Front barely beat Alessandri's would-be rightist successor in the presidential contest of 1938 with 50.3 percent of the vote. One key to the Popular Front's victory was its nomination of a mild-mannered Radical, Pedro Aguirre Cerda, rather than the inflammatory Socialist, Marmaduke Grove. The other key was a bizarre sequence of events in which a group of Chilean fascists (members of the National Socialist Movement), backing Ibáñez's independent bid for the presidency, staged an unsuccessful putsch on the eve of the election. The slaughter of the putschists by forces of the Alessandri government prompted the fascists to throw their votes to the Popular Front. Although not numerous, those ballots put the Popular Front over the top.
The incongruous alignment of Nazis behind the antifascist Popular Front showed how far Chilean politicians would go to subordinate ideology to electoral considerations. Thus, a coalition that included Socialists and Communists captured the presidency quite early in twentieth-century Chile. Future president Salvador Allende served briefly as minister of health in this period.
Running under the slogan "To Govern Is to Educate," Aguirre Cerda (president, 1938-41) won an electoral majority in 1938. However, less than 5 percent of the national population actually voted for him. Until the rapid expansion of the electorate in the 1950s, less than 10 percent of the national population voted for presidential candidates. Only literate males over the age of twenty-one could vote in most elections until the 1950s; of those eligible to vote, approximately 50 percent usually registered, and the vast majority of those registered cast ballots. Women were allowed to exercise the franchise in installments, first for municipal elections in 1935, then for congressional contests in 1951, and finally for presidential races in 1952.
As had been the case with other Chilean electoral victories by left-wing candidates, tense days passed between the counting of the ballots and the ratification of the results by Congress. Opponents of the left schemed to prevent the takeover by their nemeses or to extract concessions before accepting defeat. Aguirre Cerda assured rightists of his moderate intentions, and the Alessandri government presided over his peaceful inauguration. The military quashed a single coup attempt in 1939.
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Popular Front Rule, 1938-41
Led by the centrist Radical Party, the administration of the Popular Front assimilated the Socialists and Communists into the established bargaining system, making potentially revolutionary forces into relatively moderate participants in legal institutions. Although the official Popular Front ended in 1941, that bargaining system, with Marxist parties usually backing reformist Radical presidents, lasted until 1952.
Aguirre Cerda, like all Chilean presidents in the 1930s and 1940s, essentially pursued a model of state capitalism in which government collaborated with private enterprise in the construction of a mixed economy. The Popular Front promoted simultaneous importsubstitution industrialization and welfare measures for the urban middle and working classes. As in the rest of Latin America, the Great Depression and then the onset of World War II accelerated domestic production of manufactured consumer items, widened the role of the state, and augmented dependence on the United States. All these trends dissuaded Marxists from demanding bold redistributive measures at the expense of domestic and foreign capitalists.
Aiming to catch up with the more affluent West, Chile's Popular Front mobilized the labor movement behind national industrial development more than working-class social advances. Although workers received few material benefits from the Popular Front, the number of legal unions more than quadrupled from the early 1930s to the early 1940s. Still, unions represented only about 10 percent of the work force.
Prior to his illness and death in November 1941, President Aguirre Cerda labored to hold his coalition together, to overcome the implacable opposition of the right-wing parties, and to fulfill his promises of industrialization and urban social reform. The Socialists and Communists quarreled incessantly, especially over the PCCh's support of the 1939 German-Soviet Nonaggression Pact between Hitler and Stalin. Early in 1941, the Socialist Party withdrew from the Popular Front coalition because of its animosity toward the PCCh, its rival claimant to worker loyalty and Marxist inspiration. Because the Conservatives and Liberals blocked nearly all legislation in Congress, little social reform was accomplished, except for improvements in housing and education. To appease rightwingers , the president clamped down on rural unionization.
From the 1920s into the 1960s, this modus vivendi between urban reformers and rural conservatives held fast. Progressives carried out reforms in the cities for the middle and working classes, while denying peasants union rights. Thus were preserved the availability of low-cost foodstuffs for urban consumers, control of the countryside for latifundistas (large landowners), and domination of the rural vote by right-wing politicians. From time to time, Marxist organizers threatened to mobilize the rural work force, and time and again they were restrained by their centrist political allies, who needed to reassure the economic and political right-wingers. When peasants protested this exploitation, they were repressed by landowners or government troops.
The greatest achievement of the Popular Front was the creation in 1939 of the state Production Development Corporation (Corporación de Fomento de la Producción--Corfo) to supply credit to new enterprises, especially in manufacturing. Partly with loans from the United States Export-Import Bank, Corfo contributed greatly to import-substitution industrialization, mainly for consumer items. The economically active population working in industry grew from 15 percent in 1930 to 20 percent in 1952, where it hovered for two decades. From the end of the 1930s to the start of the 1950s, Corfo supplied almost one-fourth of total domestic investments.
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Juan Antonio Ríos's Presidency, 1942-46
A Radical even more conservative than Aguirre Cerda, Juan Antonio Ríos Morales (president, 1942-46), won the 1942 presidential election with 56 percent of the vote. Although the formal Popular Front had been terminated, the Socialists and Communists still gave their votes to Ríos to avoid a return of Ibáñez as the candidate of the Conservatives and Liberals. Under the stringencies of wartime, the new president further soft-pedaled social reform and emphasized industrial growth, under the slogan, "To Govern Is to Produce." Although he made some improvements in housing and health care, Ríos concentrated on promoting urban enterprises.
Ríos continued his predecessor's policy of neutrality in World War II. Although sympathetic to the Allies, many Chileans worried about the vulnerability of their Pacific Coast. Because of a desire for closer economic and security ties with the United States, Ríos finally bowed to pressure from Socialists, Communists, and other staunch antifascists, severing relations with the Axis in January 1943.
Even after breaking relations, Chile was never satisfied with the amount of aid and Lend-Lease military equipment it received from the United States. The United States, in turn, was equally discontent with languid Chilean action against Axis agents and firms. Nevertheless, Chile subsidized the Allied cause by accepting an artificially low price for its copper exports to the United States while paying increasingly higher prices for its imports. The war boosted Chile's mineral exports and foreign-exchange accumulation. At the same time, United States trade, credits, and advisers facilitated state support for new enterprises, including steel, oil, and fishing.
Not unlike Ibáñez in the 1920s, Ríos hoped to develop the national economy through external alignment with the "Colossus of the North." After displacing Britain as Chile's most important economic partner in the 1920s, the United States faced a period of German competition in the 1930s and then reasserted its economic dominance in the 1940s. That economic domination would last until the 1980s.
As Ríos's health deteriorated in 1945, another Radical, Alfredo Duhalde Vásquez (president, June-August 1946), took over as interim chief executive. Reacting against Ríos's conservatism and Duhalde's antilabor policies, progressive factions of the Radical Party joined with the Communists to field a left-wing Radical, Gabriel González Videla, for president in the 1946 election. González Videla also received the backing of most Socialists.
Trying to revive the reformist spirit of 1938, González Videla eked out a plurality of 40 percent against a field of rightist contenders. Once again, the candidate of the left had to walk a tightrope from election to inauguration because Congress had the right to pick either of the two front-runners when no one polled an absolute majority. González Videla ensured his congressional approval by granting landowners new legal restrictions on peasant unionization, restrictions that lasted from 1947 until 1967. He also appeased the right by including Liberals in his cabinet along with Radicals and Communists, the most exotic ministerial concoction Chileans had ever seen, again demonstrating the politician's ability to cut deals transcending ideology.
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Gabriel González Videla's Presidency, 1946-52
Chile quickly became enmeshed in the cold war, as Moscow and especially Washington meddled in its affairs. That friction resulted in the splitting of the CTCh in 1946 into Communist and Socialist branches and then the outlawing of the PCCh. The Socialists were now opposed to the Communists and aligned with the (American Federation of Labor-Congress of Industrial Organizations, the AFL-CIO), having grown closer to United States labor interests during World War II.
Once in office, González Videla (president, 1946-52) rapidly turned against his Communist allies. He expelled them from his cabinet and then banned them completely under the 1948 Law for the Defense of Democracy. The PCCh remained illegal until 1958. He also severed relations with the Soviet Union, Yugoslavia, and Czechoslovakia.
Controversy still swirls around the reasons for this aboutface . According to González Videla and his sympathizers, the repression of the Communists was necessary to thwart their plots against his government, although no evidence has been found to substantiate that claim. According to the Communists and other critics of González Videla, he acted under pressure from the United States and out of a desire to forge closer economic and military bonds with the dominant superpower. Historians have established that the president wanted to appease the United States, that the United States encouraged a crackdown on Chilean Communists, and that the United States government appreciated González Videla's actions and thereafter expanded the scope of its loans, investments, and technical missions to Chile. The United States and Chile also agreed to a military assistance pact while González Videla was president. However, no conclusive evidence has come to light that the United States directly pushed him to act.
Although González Videla feared Communist intentions and respected the wishes of the United States government, he also turned against the PCCh for other reasons. He hoped to mollify right-wing critics of his government, especially landowners, to whom he guaranteed a continuing moratorium on peasant unionization. He sought to remove any ideological justification for a military coup. He also wanted to weaken the labor movement in a time of economic uncertainties, slow growth, and rising inflation, when the PCCh was promoting strikes. González Videla's banning of the Communists coincided with his movement away from social reform in favor of the promotion of industrial growth.
As the Radical years (1938-52) drew to a close, Popular Frontstyle coalition politics reached a dead end. The Radicals had swerved to the right, the Socialists had splintered and lost votes, and the Communists had been forced underground. Although the middle and upper classes had registered some gains in those fourteen years, most workers had seen their real income stagnate or decline. Often a problem in the past, inflation had become a permanent feature of the Chilean economy, fueled by the deficit spending of a government that had grown enormously under the Radical presidents. Progress had been made in industrialization, but with little benefit to the majority of the population. Promoting urban industries did not generate the growth, efficiency, employment, or independence promised by the policy's advocates. World War II had left the country more dependent than ever on the United States, which by then had become the dominant economic power in Latin America.
Populist development strategies had proved viable during the 1930s and 1940s. The protection and credit that went along with import-substitution industrialization had kept manufacturers satisfied. Although penalized and forced to accept low prices for their foods, agriculturalists welcomed expanding urban markets, low taxes, and controls over rural workers. The middle class and the armed forces had applauded state growth and moderate nationalism. The more skilled and organized urban workers had received consumer, welfare, and union benefits superior to those offered to other lower-class groups.
These allocations postponed any showdown over limited resources, thus enabling right and left to compromise. Political institutionalization and accommodation prevailed, partly because the unorganized urban poor and especially the rural poor suffered, in effect, from marginality (see Glossary). Starting in the 1950s, however, social demands outpaced slow economic growth, and the political arena became increasingly crowded and heated. In addition, accelerated mobilization, polarization, and radicalization by ideologically competing parties placed more and more stress on the "compromise state" to reconcile incompatible demands and projects.
By 1952 Chileans were alienated by multiparty politics that produced reformist governments, which would veer to the right once in office. Chileans were tired of politiquería (petty politics, political chicanery, and pork-barrel politics). Citizens were also dismayed by slow growth and spiraling inflation. They showed their displeasure by turning to two symbols of the past, the 1920s dictator Ibáñez and the son of former president Alessandri.
In an effort to "sweep the rascals out," the voters elected the politically unaffiliated Ibáñez back to the presidency in 1952. Brandishing his broom as a symbol, the "General of Victory" ran against all the major parties and their clientelistic system of government. He made his strongest attacks on the Radicals, accusing them of mismanagement of the economy and subservience to the United States.
Along with the short-lived Agrarian Labor Party (1945-58), a few Communists backed Ibáñez in hopes of relegalizing the PCCh; a few Socialists also supported him in hopes of spawning a workers' movement similar to Peronism (see Glossary) in Argentina. Other leftists, however, endorsed the first token presidential campaign of Salvador Allende in order to stake out an independent Marxist strategy for future runs at the presidency. Allende received only 5 percent of the vote, while Ibáñez won with a plurality of 47 percent. As it always did when no candidate captured an absolute majority, Congress ratified the top vote-getter as president.
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Ibáñez's Second Presidency, 1952-58
Like the Radicals before him, Ibáñez entered office as a reformer governing with a center-left coalition and ended his term as a conservative surrounded by rightists. Along the way, he discarded his promises of economic nationalism and social justice. Also like the Radicals, he left festering problems for subsequent administrations.
Early in his administration, Ibáñez tried to live up to his billing as a nationalistic reformer. He rewarded those who had voted for him in the countryside by setting a minimum wage for rural laborers, although real wages for farm workers continued to fall throughout the decade. He also postured as a Latin American spokesman, hailing Juan Domingo Perón when the Argentine leader visited Chile.
After two years of expansionary fiscal policies in league with reformers and a few leftists, Ibáñez converted to a conservative program to stem inflation and to improve relations with the United States copper companies. As the effort to move import-substitution industrialization beyond the stage of replacing foreign consumer goods bogged down, the economy became mired in stagflation. The rates of industrialization, investment, and growth all slowed. Monetarist policies proposed by a team of United States experts, known as the Klein-Saks Mission, failed to bring inflation under control. Price increases averaged 38 percent per year during the 1950s.
Persistent inflation stoked a debate among economists over causes and cures. Emphasizing deep-rooted causes and long-term solutions, advocates of structuralism (see Glossary) blamed chronic inflation primarily on foreign trade dependency, insufficient local production (especially in agriculture), and political struggles over government spoils among entrenched vested interests. Their opponents, avocates of monetarism (see Glossary), attributed rising prices principally to classic financial causes such as currency expansion and deficit spending. Like the Klein-Saks Mission, the monetarists recommended austerity measures to curb inflation. The structuralists denounced such belt-tightening as recessionary, inimical to growth, and socially regressive. The monetarists replied that economic development would be delayed and distorted until expansionary monetary and financial policies were corrected (see Evolution of the Economy , ch. 3).
Adopting a monetarist approach, in 1955 Ibáñez made concessions to the United States copper companies, chiefly Anaconda and Kennecott, in an effort to elicit more investment. These measure reduced the firms' taxes and raised their profits but failed to attract much capital. Discontent with this experience underlay subsequent campaigns to nationalize the mines.
Ibáñez also enacted reforms to increase the integrity of the electoral system. Under the new plan, the secret ballot system was improved in 1958, and stiff fines for fraud were established. These reforms reduced the sway of landowners and facilitated the growth of the Christian Democrat and Marxist political movements among peasants.
Ibáñez's middle- and working-class support flowed over to the Christian Democrats and the Marxists. The Christian Democratic Party (Partido Demócrata Cristiano--PDC) was founded in 1957 with the merger of three conservative elements: the National Falange, founded in 1938; the Social Christian Conservative Party; and the remnants of the Agrarian Labor Party that had backed Ibáñez. The Christian Democrats espoused reformist Catholic doctrines that promised a society based on communitarianism. The new party appealed strongly to the middle class, women, peasants, and ruralurban migrants. Its displacement of the Radicals as the preeminent centrist party meant that a pragmatic organization was replaced by an ideological group less amenable to coalition and compromise. At the same time that the center was hardening its position, the right and the left were also becoming more dogmatic and sectarian.
Relegalized by Ibáñez in 1958, the PCCh formed an enduring electoral alliance with the Socialists known as the Popular Action Front (Frente de Acción Popular--FRAP). The Marxist parties embraced more militant projects for the construction of socialism and disdained alliances behind centrist parties. They replaced Popular Front politics with "workers front" politics. The PCCh and the Socialist Party became more exclusive and radical in their ideological commitments and in their dedication to the proletariat. Of the two parties, the Socialist Party posed as more revolutionary, especially after the 1959 Cuban Revolution.
As they had in the 1930s, the Marxist parties experienced success in the 1950s in tandem with a unified national trade union movement. Dismayed by runaway inflation, the major labor unions replaced the fractionalized CTCh with the United Federation of Chilean Workers (Central Única de Trabajadores de Chile--CUTCh) in 1953. The Communists and Socialists, with their enduring strength in older unions in mining, construction, and manufacturing, took command of the new confederation.
As the 1958 election approached, the electorate divided into three camps well-defined by their predominant class and ideology. The right represented mainly Conservatives and Liberals, the upper class, rural dwellers, the defenders of capitalism, and the status quo. In the center, the Christian Democrats and Radicals spoke largely for the middle class and the proponents of moderate social reforms to avoid socialism. On the left, the Socialists and Communists championed the working class, advocating a peaceful transition to socialism. Rural-urban migrants and women had gained social and political importance. The percentage of the population registered to vote in presidential contests had risen from about 11 percent in the 1940s to 17.5 percent in 1952 and then to 21 percent in 1958. In the 1958 election, the right--Conservatives and Liberals--hoped to return to power for the first time since 1938. Their standard-bearer was Jorge Alessandri Rodríguez, an engineering professor and the son of Chile's most recent rightist president. He posed as an independent who was above party politics, offering technocratic solutions to the nation's problems. In the center, the Radicals, with candidate Luis Bossay Leyva, and the Christian Democrats, who nominated Eduardo Frei Montalva, vied for moderate votes. On the left, the reunited Socialists and Communists backed Salvador Allende.
In a preview of the 1970 election, the 1958 vote split three ways: 31 percent for Alessandri, 29 percent for Allende, and 40 percent for the rest, including a strong third-place showing by Frei with 21 percent. If it had not been for the 3 percent of the votes snared by a populist defrocked priest, the 15 percent won by the Radicals, and the low percentage (22 percent) of women casting ballots for Allende, the Marxists could easily have captured the presidency in 1958, several months before the Cuban Revolution. As it was, they and the Christian Democrats were highly encouraged to build their electoral forces toward another face-off in 1964. An especially noteworthy shift was the transfer of many peasant votes from the right to the columns of Christian Democrat and Marxist politicians promising agrarian reform.
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Jorge Alessandri's Rightist Term, 1958-64
Once again, Congress approved the front-runner as president. Alessandri promised to restrain government intervention in the economy and to promote the private sector, although he did not envision reliance on the market to the extent that later would occur under Pinochet. With a slender mandate, the opposition in control of the legislature, and a modest program, the president accomplished little of great note.
Alessandri did, however, maintain political and economic stability. He temporarily dampened inflation, mainly by placing a ceiling on wages. This measure sparked mounting labor protests in the early 1960s. The economy grew and unemployment shrank. He also passed mild land-reform legislation, which would be implemented mostly by his successors. His action was partly the result of prodding by the United States government, which backed agrarian reform under the auspices of the Alliance for Progress (see Glossary) in hopes of blunting the appeal of the Cuban Revolution. At the same time, Alessandri tried to attract foreign investment, although he had no intention of throwing open the economy, as would be done under Pinochet. By the end of Alessandri's term, the country was burdened with a rising foreign debt.
In the 1964 presidential contest, the right abandoned its standard-bearers and gave its support to Frei in order to avert an Allende victory in the face of rising electoral support for the leftists. The center-right alliance defeated the left, 56 percent to 39 percent. The reformist Frei enjoyed strong United States support, both during and after the campaign. He also had the backing of the Roman Catholic Church and European Christian Democrats. Frei ran particularly well among women, the middle class, peasants, and residents of the shantytowns (callampas or poblaciones). Allende was most popular with men and bluecollar workers.
Although Frei and Allende were foes on the campaign trail, they agreed on major national issues that needed to be addressed: greater Chilean control over the United States-owned copper mines, agrarian reform, better housing for the residents of the sprawling shantytowns, more equitable income distribution, expanded educational opportunities, and a more independent foreign policy. They both criticized capitalism as a cause of underdevelopment and of the poverty that afflicted the majority of Chile's population. To distinguish his more moderate program from Allende's Marxism, Frei promised a "Revolution in Liberty."
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Eduardo Frei's Christian Democracy, 1964-70
After the 1965 elections gave them a majority of deputies in Congress, the Christian Democrats enacted ambitious reforms on many fronts. However, as a single-party government, they were often loath to enter into bargains, compromises, or coalitions. Consequently, rightists and leftists often opposed their congressional initiatives, especially in the Senate.
One of the major achievements of Eduardo Frei Montalva (president, 1964-70) was the "Chileanization" of copper. The government took 51 percent ownership of the mines controlled by United States companies, principally those of Anaconda and Kennecott. Critics complained that the companies received overly generous terms, invested too little in Chile, and retained too much ownership. Nevertheless, copper production rose, and Chile received a higher return from the enterprises.
Frei believed that agrarian reform was necessary to raise the standard of living of rural workers, to boost agricultural production, to expand his party's electoral base, and to defuse revolutionary potential in the countryside. Consequently, in 1967 his government promoted the right of peasants to unionize and strike. The administration also expropriated land with the intention of dividing it between collective and family farms. However, actual redistribution of land fell far short of promises and expectations. Conflict arose in the countryside between peasants eager for land and landowners frightened of losing their rights and their property.
During the tenure of the Christian Democrats, economic growth remained sluggish and inflation stayed high. Nevertheless, Frei's government improved income distribution and access to education, as enrollments rose at all levels of schooling. Under the aegis of "Popular Promotion," the Frei government organized many squatter communities and helped them build houses. This aided the PDC in its competition with the Marxists for political support in the burgeoning callampas. At the same time, Frei enacted tax reforms that made tax collection more efficient than ever before. The Christian Democrats also pushed through constitutional changes to strengthen the presidency; these changes later would be used to advantage by Allende. The PDC also revised electoral regulations, lowering the voting age from twenty-one to eighteen and giving the franchise to people who could not read (about 10 percent of the population was illiterate).
Although friendly to United States investors and government officials, the Frei administration took an independent stance in foreign affairs--more collegial with the developing nations and less hostile to the Communist bloc nations. For instance, Frei restored diplomatic relations with the Soviet Union and most of its allies. Chile also gave strong backing to multilateral organizations, including the Latin American Free Trade Association ( LAFTA--see Glossary), the Andean Group (see Glossary), the Organization of American States ( OAS--see Glossary), and the United Nations. Meanwhile, aid and investment from the United States multiplied. Under Frei, Chile received more aid per capita from the United States than did any other country in Latin America.
After the two governments that followed the Christian Democrats, Chileans would look back with nostalgia on the Frei administration and its accomplishments. At the time, however, it was hounded by the right for being too reformist and by the left for being too conservative. While some on the right began forming paramilitary units to defend their property, some on the left began encouraging illegal seizures of farms, housing plots, and factories. Among the masses, the Christian Democrats raised expectations higher than they intended.
As the next presidential election approached, Frei remained personally popular, but his party's strength ebbed. With no clear winner apparent, the 1970 campaign shaped up as a rerun of 1958, with the right, center, and left all fielding their own candidates. The right hoped to recapture power and brake the pace of reform with former president Jorge Alessandri as the candidate of the National Party (Partido Nacional--PN), established in 1965 by Conservatives and Liberals. In the center, the Christian Democrats promised to accelerate reform with a progressive candidate, Radomiro Tomic Romero. The left vowed to head down the road toward socialism with Salvador Allende as its nominee for the fourth time.
Under the leadership of the Socialist Party and the PCCh, the leftist coalition of 1970 called itself Popular Unity (Unidad Popular--UP). Joining the alliance were four minor parties, including the shrunken Radical Party and defectors from the Christian Democrats, most notably the United Popular Action Movement (Movimiento de Acción Popular Unitario--MAPU). The coalition was reminiscent of the Popular Front of 1936-41, except that it was led by the Marxist parties and a Marxist candidate. Further to the left, the Movement of the Revolutionary Left (Movimiento de la Izquierda Revolucionaria--MIR), a small organization headed by radicalized students, scoffed at the electoral route, called for armed struggle, and undertook direct assaults on the system, such as bank robberies (see Terrorism , ch. 5).
To the surprise of most pollsters and prognosticators, Allende nosed out Alessandri 36.2 percent to 35 percent in the September 4, 1973, elections; Tomic trailed with 27.8 percent of the vote. In the cold war context of the times, the democratic election of a Marxist president sent a shock wave around the globe. The seven weeks between the counting of the ballots and the certification of the winner by Congress crackled with tension. Attempts by the United States and by right-wing groups in Chile to convince Congress to choose the runner-up Alessandri or to coax the military into staging a coup d'état failed. A botched kidnapping planned by right-wing military officers resulted in the assassination of the army commander in chief, General René Schneider Chereau, on October 22, 1970, the first major political killing in Chile since the death of Portales in 1837. That plot backfired by ensuring the armed forces' support of a constitutional assumption of power by Allende.
After extracting guarantees of adherence to democratic procedures from Allende, the Christian Democrats in Congress followed tradition and provided the votes to make the front-runner Chile's new president. Although a minority president was not unusual, one with such a drastic plan to revolutionize the nation was unique. Allende was inaugurated on November 3, 1970.
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Salvador Allende's Leftist Regime, 1970-73
The Allende experiment enjoyed a triumphant first year, followed by two disastrous final years. According to the UP, Chile was being exploited by parasitic foreign and domestic capitalists. The government therefore moved quickly to socialize the economy, taking over the copper mines, other foreign firms, oligopolistic industries, banks, and large estates. By a unanimous vote of Congress in 1971, the government totally nationalized the foreign copper firms, which were mainly owned by two United States companies, Kennecott and Anaconda. The nationalization measure was one of the few bills Allende ever got through the opposition- controlled legislature, where the Christian Democrats constituted the largest single party.
Socialization of the means of production spread rapidly and widely. The government took over virtually all the great estates. It turned the lands over to the resident workers, who benefited far more than the owners of tiny plots or the numerous migrant laborers. By 1972 food production had fallen and food imports had risen. Also during 1971-72, the government dusted off emergency legislation from the 1932 Socialist Republic to allow it to expropriate industries without congressional approval. It turned many factories over to management by the workers and the state.
In his first year, Allende also employed Keynesian measures to hike salaries and wages, thus pumping up the purchasing power of the middle and working classes. This "consumer revolution" benefited 95 percent of the population in the short run because prices were held down and employment went up. Producers responded to rising demand by employing previously underused capacity.
Politically, Allende faced problems holding his Popular Unity coalition together, pacifying the more leftist elements inside and outside Popular Unity and, above all, coping with the increasingly implacable opposition. Within Popular Unity, the largest party was the Socialist Party. Although composed of multiple factions, the Socialist Party mainly pressed Allende to accelerate the transition toward socialism. The second most important element was the PCCh, which favored a more gradual, legalistic approach. Outside the Popular Unity, the most significant left-wing organization was the MIR, a tiny but provocative group that admired the Cuban Revolution and encouraged peasants and workers to take property and the revolutionary process into their own hands, much faster than Allende preferred.
The most important opposition party was the PDC. As it and the middle sectors gradually shifted to the right, they came to form an anti-Allende bloc in combination with the Natinal Party and the propertied class. Even farther to the right were minuscule, paramilitary, quasi-fascist groups like Fatherland and Liberty (Patria y Libertad), determined to sabotage Popular Unity.
The Popular Unity government tried to maintain cordial relations with the United States, even while staking out an independent position as a champion of developing nations and socialist causes. It opened diplomatic relations with Cuba, China, the Democratic People's Republic of Korea (North Korea), the Democratic Republic of Vietnam (North Vietnam), and Albania. It befriended the Soviet Union, which sent aid to the Allende administration, although far less than Cuba received or than Popular Unity had hoped for.
Meanwhile, the United States pursued a two-track policy toward Allende's Chile. At the overt level, Washington was frosty, especially after the nationalization of the copper mines; official relations were unfriendly but not openly hostile. The government of President Richard M. Nixon squeezed the Chilean economy by terminating financial assistance and blocking loans from multilateral organizations, although it increased aid to the military, a sector unenthusiastic toward the Allende government. It was widely reported that at the covert level the United States worked to destabilize Allende's Chile by funding opposition political groups and media and by encouraging a military coup d'état. Most scholars have concluded that these United States actions contributed to the downfall of Allende, although no one has established direct United States participation in the coup d'état and very few would assign the United States the primary role in the destruction of that government.
During the second and third years of the UP, demand outstripped supply, the economy shrank, deficit spending snowballed, new investments and foreign exchange became scarce, the value of copper sales dropped, shortages appeared, and inflation skyrocketed, eroding the previous gains for the working class. A thriving black market sprang up. The government responded with direct distribution systems in working-class neighborhoods. Worker participation in the management of enterprises reached unprecedented proportions. The strapped government could not keep the economy from going into free fall because it could not impose austerity measures on its supporters in the working class, get new taxes approved by Congress, or borrow enough money abroad to cover the deficit.
Although the right was on the defensive in Allende's first year, it moved on the offensive and forged an alliance with the center in the next two years. In Congress this center-right coalition erected a blockade against all Popular Unity initiatives, harassed Popular Unity cabinet ministers, and denounced the administration as illegitimate and unconstitutional, thus setting the stage for a military takeover. The most acrimonious battle raged over the boundaries of Popular Unity's "social property area" (área de propriedad social), which would incorporate private holdings through government intervention, requisition, or expropriation. The Supreme Court and the comptroller general of the republic joined Congress in criticizing the executive branch for overstepping its constitutional bounds.
Allende tried to stabilize the situation by organizing a succession of cabinets, but none of them guaranteed order. His appointment of military officers to cabinet posts in 1972 and 1973 also failed to stifle the opposition. Instead, it helped politicize the armed services. Outside the government, Allende's supporters continued direct takeovers of land and businesses, further disrupting the economy and frightening the propertied class.
The two sides reached a showdown in the March 1973 congressional elections. The opposition expected the Allende coalition to suffer the typical losses of Chilean governments in midterm elections, especially with the economy in a tailspin. The National Party and PDC hoped to win two-thirds of the seats, enough to impeach Allende. They netted 55 percent of the votes, not enough of a majority to end the stalemate. Moreover, the Popular Unity's 43 percent share represented an increase over the presidential tally of 36.2 percent and gave Allende's coalition six additional congressional seats; therefore, many of his adherents were encouraged to forge ahead.
In the aftermath of the indecisive 1973 congressional elections, both sides escalated the confrontation and hurled threats of insurgency. Street demonstrations became almost daily events and increasingly violent. Right-wing groups, such as Fatherland and Liberty, and left-wing groups, such as the MIR, brandished arms and called for a cataclysmic solution. The most militant workers formed committees in their neighborhoods and workplaces to press for accelerated social change and to defend their gains. The opposition began openly knocking on the doors of the barracks in hopes that the military would provide a solution.
The regular armed forces halted an attempted coup by tank commanders in June 1973, but that incident warned the nation that the military was getting restless. Thereafter, the armed forces prepared for a massive coup by stepping up raids to search for arms among Popular Unity's supporters. Conditions worsened in June, July, and August, as middle- and upper-class business proprietors and professionals launched another wave of workplace shutdowns and lockouts, as they had in late 1972. Their 1973 protests against the government coincided with strikes by the trucking industry and by the left's erstwhile allies among the copper workers. The Nationalists, the Christian Democrats, and conservative students backed the increasingly subversive strikers. They called for Allende's resignation or military intervention. Attempts by the Catholic Church to get the PDC and Popular Unity to negotiate a compromise came to naught. Meanwhile, inflation reached an annual rate of more than 500 percent. By mid-1973 the economy and the government were paralyzed.
In August 1973, the rightist and centrist representatives in the Chamber of Deputies undermined the president's legitimacy by accusing him of systematically violating the constitution and by urging the armed forces to intervene. In early September, Allende was preparing to call for a rare national plebiscite to resolve the impasse between Popular Unity and the opposition. The military obviated that strategy by launching its attack on civilian authority on the morning of September 11. Just prior to the assault, the commanders in chief, headed by the newly appointed army commander, General Augusto Pinochet Ugarte, had purged officers sympathetic to the president or the constitution.
Allende committed suicide while defending (with an assault rifle) his socialist government against the coup d'état. Although sporadic resistance to the coup erupted, the military consolidated control much more quickly than it had believed possible. Many Chileans had predicted that a coup would unleash a civil war, but instead it ushered in a long period of repression.
Debate continues over the reasons for Allende's downfall. Why did he fail to preserve democracy or achieve socialism? Critics of the left blamed Allende for going to extremes, destroying the economy, violating the constitution, and undermining the spirit if not the letter of democracy. Right-wing critics in particular accused the left of even plotting an armed takeover, a charge that was never proved. Critics also assailed the UP for being unclear about the limits of its reforms and thus frightening the middle class into the arms of the opposition. Critics of the right accused Popular Unity, in conjunction with the United States, of ruining the economy and of calling out the armed forces to protect its property and privileges. Observers in general scolded the far left for its adventurous excesses. The far left retorted that Popular Unity failed because it was too timid to arm the masses. Critics of the Christian Democrats chastised them for refusing to compromise, locking arms with the rightist opposition, and failing to defend democracy.
Many analysts would concur that there was ample blame to go around. In the view of many Chileans, groups at all points on the political spectrum helped destroy the democratic order by being too ideological and too intransigent. Many observers agree that a minority president facing adamant domestic and foreign opposition was extremely unlikely to be able to uphold democracy and create socialism at the same time. In the late 1980s, polls also showed that most Chileans did not want to try the Popular Unity experiment again, especially in light of its aftermath.
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MILITARY RULE, 1973-90
The armed forces justified the coup as necessary to stamp out Marxism, avert class warfare, restore order, and salvage the economy. They enshrined the National Security Doctrine, which defined their primary task as the defeat of domestic enemies who had infiltrated national institutions, including schools, churches, political parties, unions, and the media. Although civilians filled prominent economic posts, military officers took most government positions at the national and local levels. Immediately on seizing power, the military junta--composed of the commanders in chief of the army, navy, air force, and national police--issued a barrage of decrees to restore order on its own terms.
The first phase of the dictatorship (1973-75) was mainly destructive, aimed at rapid demobilization, depoliticization, and stabilization. The armed forces treated the members of the UP as an enemy to be obliterated, not just as an errant political movement to be booted from office. The military commanders closed Congress, censored the media, purged the universities, burned books, declared political parties outlawed if Marxist or in recess otherwise, and banned union activities.
The worst human rights abuses occurred in the first four years of the junta, when thousands of civilians were murdered, jailed, tortured, brutalized, or exiled, especially those linked with the Popular Unity parties. The secret police, reporting to Pinochet through the National Intelligence Directorate (Dirección Nacional de Inteligencia--DINA), replaced in 1977 by the National Information Center (Centro Nacional de Información--CNI), kept dissidents living in fear of arrest, torture, murder, or "disappearance."
Throughout the second half of the 1970s, the Roman Catholic Church and international organizations concerned with human rights denounced the widespread violations of decency in Chile. Although officially neutral, the Roman Catholic Church became the primary sanctuary for the persecuted in Chile from 1975 to 1985 and so came into increasing conflict with the junta.
The former members of Popular Unity went underground or into exile. In the early years of the dictatorship, their main goal was simply to survive. Although the Communists suffered brutal persecution, they managed to preserve their organization fairly intact. The Socialists splintered so badly that their party nearly disappeared by the end of the 1970s. Draconian repression left the Marxists with no capacity to resist or counterattack. They did, however, manage to rally world opinion against the regime and keep it diplomatically isolated. By the end of the 1970s, most Christian Democrats, after initially cooperating with the junta, had also joined the opposition, although not in any formal coalition with any coherent strategy for restoring democracy.
Pinochet soon emerged as the dominant figure and very shortly afterward as president. After a brief flirtation with corporatist ideas, the government evolved into a one-man dictatorship, with the rest of the junta acting as a sort of legislature. In 1977 Pinochet dashed the hopes of those Chileans still dreaming of an early return to democracy when he announced his intention to institutionalize an authoritarian regime to preside over a protracted return to civilian rule in a "protected" democracy.
Pinochet established iron control over the armed forces as well as the government, although insisting that they were separate entities. He made himself not only the chief executive of the state but also the commander in chief of the military. He shuffled commands to ensure that loyalists controlled all the key posts. He appointed many new generals and had others retire, so that by the 1980s all active-duty generals owed their rank to Pinochet. He also improved the pay and benefits of the services. The isolation of the armed forces from civil society had been a virtue under the democracy, inhibiting their involvement in political disputes; now that erstwhile virtue became an impediment to redemocratization, as the military remained loyal to Pinochet and resisted politicization by civilians.
Although aid and loans from the United States increased spectacularly during the first three years of the regime, while presidents Nixon and Gerald R. Ford were in office, relations soured after Jimmy Carter was elected president in 1976 on a platform promising vigorous pursuit of human rights as a major component of his foreign policy. During the Carter administration, a significant source of contention was the 1976 assassination in Washington of the former Chilean ambassador to the United States by agents of Pinochet's secret police. The victim, Orlando Letelier, had served under Allende. In response to United States criticism, General Pinochet held his first national plebiscite in 1978, calling for a yes or no vote on his defense of Chile's sovereignty and the institutionalization of his regime. The government claimed that more than 75 percent of the voters in the tightly controlled referendum endorsed Pinochet's rule.
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Neoliberal Economics
By the mid-1970s, the dictatorship switched from destroying the old order to constructing its version of a new Chile. The junta not only overturned decades of democratic government but also decades of statist economic policies, which had mainly protected industrialists and organized workers. The new economic program was designed by civilian technocrats known as the "Chicago boys" (see Glossary) because many of them had been trained or influenced by University of Chicago professors. The government instituted a dramatic conversion to free-market economics in 1975.
After curbing inflation and returning a significant amount of property to its former owners, the administration embarked on a radical program of liberalization and privatization, slashing tariffs as well as government welfare programs and deficits. As a result, the economy grew rapidly from 1976 to 1981, a feat heralded as the "Chilean miracle." That growth was fueled by the influx of private foreign loans until the debt crisis of the early 1980s. Financial conglomerates became the major beneficiaries of the open economy and the flood of foreign bank loans. Exports of nontraditional commodities, especially fruit, timber, and fish products, also grew impressively; the value of new exportables came to equal that of copper sales. Despite high growth in the late 1970s, income distribution became more regressive and unemployment stayed in double digits. The underemployed informal sector also mushroomed in size. The regime responded with a "minimum employment" public works program (see The Military Government's Free-Market Reforms, 1973-90 , ch. 3).
In conjunction with the liberalization of the economy, the junta implemented a series of social reforms to reduce the role of the central government in social security, labor disputes, health care, and education. These reforms fit with the desire to shrink the central government, decentralize administration, and privatize previous state functions. Critics charged that the welfare state was being dismantled to leave citizens at the mercy of the marketplace. The regime retorted that it was focusing its social assistance on the poorest of the poor to meet basic needs, and it pointed with pride to improvement in such indicators as infant mortality (see Welfare Institutions and Social Programs , ch. 2; Economic Results of the Pensions Privatization , ch. 3).
The most important of the government's so-called modernizations in social policy was the 1979 Labor Plan. The regime had already outlawed the CUTCh, Marxist union leaders, several Marxist unions, union elections, strikes, and collective bargaining. Nevertheless, after bearing the brunt of repression in 1973-74, unions gradually revived in the late 1970s. Little by little, cooperation increased between Marxist and Christian Democrat union leaders, the latter making gains because the former were outlawed. Although a few unions supported the government, most firmly opposed the regime and its economic program. The Labor Plan sought to codify the dictatorship's antilabor policies. It placed stringent limits on collective bargaining, strikes, and other union activities, especially any participation in politics. Almost all labor unions rejected the Labor Plan and aligned with the opposition (see Unions and Labor Conflicts , ch. 3).
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The 1980 Constitution
At the height of the economic boom, the regime moved to legitimize and regularize its reforms and its tenure. Its new "constitution of liberty" was approved in a controlled plebiscite in 1980, in which the government claimed to have received 67 percent of the vote. Both leftists and Christian Democrats had called for a no vote. Because there were no safeguards for the opposition or for the balloting, most analysts expressed doubts about the government's percentage and assumed that the constitution may have won by a lesser margin. According to the new constitution, Pinochet would remain president through 1989; a plebiscite in 1988 would determine if he would have an additional eight years in office. The document provided for military domination of the government both before and after the 1988 plebiscite.
The constitution's approval marked the institutionalization of Pinochet's political system. In the eyes of the military, a dictatorship had now been transformed into an authoritarian regime, rule by exception having been replaced by the rule of law. When the new charter took effect in 1981, the dictatorship was at the peak of its powers, politically untouchable and economically successful. At that moment, few would have predicted that the dispirited and fragmented opposition would take power by the end of the decade.
The imposition of the authoritarian constitution cast further gloom on the divided and dejected opposition. The PCCh now made a historic reversal, claiming that all forms of struggle, including armed insurrection, were justified against the dictatorship. Most political parties on the left or in the center, however, continued searching for a peaceful path to redemocratization.
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The Crisis of 1982 and the Erosion of Military Rule
From 1982 to 1990, Chile underwent a prolonged journey back to democracy. During that process, the country experienced five crucial changes. First, the economic collapse in 1982 provoked some adjustments to the neoliberal model and sparked widespread protests against the regime. That recession was compounded by the international debt crisis.
Second, although most of the regime's supporters in the business community and the armed forces held fast, the 1980s witnessed a weakening of their attachment to authoritarianism and a few defections from their ranks. Third, civil society became emboldened. A series of demonstrations against Pinochet during 1983-85 spread from organized labor to the middle class and finally ended up concentrated among the residents of the urban shantytowns. Fourth, the previously repressed and dormant political parties came back to life. They took charge during the 1988 plebiscite that effectively ended the Pinochet regime and the subsequent 1989 elections for president and Congress. Fifth, after being surrounded by like-minded dictators in South America, Pinochet became isolated as a tide of democratization swept the continent, and the United States and Europe began applying pressure for Chile to join the trend.
In sum, from its apogee in the 1980 plebiscite to its exit in 1990, the authoritarian regime lost support and saw its opponents gain momentum and eventually power. During its first decade, however, the dictatorship had brought about profound and seemingly durable changes. Politically, it had pulverized the revolutionary Marxist left. Economically, it had moved Chile's focus from the state to the market. Socially, it had fostered a new emphasis on individualism and consumerism, widening the gap between rich and poor, even while helping some of the most destitute. What it had failed to do was to extirpate the preference of most Chileans for democracy.
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Among works in English, an outstanding general history is Brian Loveman's Chile: The Legacy of Hispanic Capitalism. For the colonial period, Eugene H. Korth provides a useful introduction in Spanish Policy in Colonial Chile. The subsequent Bourbon years are covered by Jacques A. Barbier in Reform and Politics in Bourbon Chile, 1755-1796.
For the nineteenth century, the work to begin with is Simon Collier's Ideas and Politics of Chilean Independence. The development of the system of land tenure is examined by Arnold J. Bauer in Chilean Rural Society from the Spanish Conquest to 1930. The country's external relations are analyzed by Robert N. Burr in By Reason or Force. Works covering the nitrate era and the Balmaceda controversy include Thomas F. O'Brien's The Nitrate Industry and Chile's Crucial Transition, 1870-1891; Michael Monteón's Chile in the Nitrate Era; Maurice Zeitlin's The Civil Wars in Chile, 1851 and 1859; and Harold Blakemore's British Nitrates and Chilean Politics, 1886-1896.
Chilean relations with the United States can be surveyed in Fredrick B. Pike's Chile and the United States, 1880-1962 and in William F. Sater's Chile and the United States. General coverage of the economy is found in Markos J. Mamalakis's The Growth and Structure of the Chilean Economy. A classic work on the copper industry is Theodore H. Moran's Multinational Corporations and the Politics of Dependence. The development of organized labor is explained in Peter de Shazo's Urban Workers and Labor Unions in Chile, 1902-1927 and in Alan Angell's Politics and the Labour Movement in Chile. On rural conflicts, valuable sources include Brian Loveman's Struggle in the Countryside and Thomas C. Wright's Landowners and Reform in Chile. Concerning the role of the Catholic Church, the key source is Brian H. Smith's The Church and Politics in Chile. The armed forces are covered in Frederick M. Nunn's The Military in Chilean History.
The evolution of the political system is discussed by Timothy R. Scully in Rethinking the Center. Political developments leading up to the tragedy under Allende are traced by Paul W. Drake in Socialism and Populism in Chile, 1932-52, by Federico G. Gil in The Political System of Chile, and by James F. Petras in Politics and Social Forces in Chilean Development.
The two most controversial governments in Chilean history have generated a voluminous literature. On the Allende experiment, the best books to start with are Stefan de Vylder's Allende's Chile; Edy Kaufman's Crisis in Allende's Chile; Ian Roxborough, Philip O'Brien, and Jackie Roddick's Chile: The State and Revolution; Paul E. Sigmund's The Overthrow of Allende and the Politics of Chile, 1964-1976; Barbara Stallings's Class Conflict and Economic Development in Chile, 1958-1973; Arturo Valenzuela's The Breakdown of Democratic Regimes: Chile; and Peter Winn's Weavers of Revolution.
The first half of the Pinochet period is dissected by J. Samuel Valenzuela and Arturo Valenzuela in Military Rule in Chile, the second half by Paul W. Drake and Iván Jaksic in The Struggle for Democracy in Chile, 1982-1990, and the entire seventeen years by Pamela Constable and Arturo Valenzuela in A Nation of Enemies. Analyses of the dictatorship's economic innovations are provided in Sebastian Edwards and Alejandra Cox Edwards's Monetarism and Liberalization and in Alejandro Foxley Riesco's Latin American Experiments in Neoconservative Economics. (For further information and complete citations, see Bibliography.)
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Chapter 2. The Society and Its Environment
THE DEVELOPMENT OF CHILEAN SOCIETY since the country broke away from Spain early in the nineteenth century reflects in many ways a significant incongruity. On the one hand, the nation's political institutions and many of its social institutions developed much like their counterparts in the United States and Western Europe. On the other hand, the economy had a history of insufficient and erratic growth that left Chile among the less developed nations of the world. Given the first of these characteristics, Chilean society, culture, and politics have struck generations of observers from more developed nations as having what can be described, for want of a better expression, as a familiar "modernity." Yet this impression always seemed at odds with the lack of resources at all levels, the highly visible and extensive urban and rural poverty, and the considerable social inequalities.
Chile's location on the far southern shores of the Americas' Pacific coast made international contacts difficult until the great advance in global air travel and communications of the post-World War II period. This relative isolation of a people whose main cultural roots lay in the Iberian-Catholic variant of Western civilization probably had the paradoxical effect of making Chileans more receptive to outside influences than would otherwise have been the case. The small numbers of foreign travelers reaching the country in the nineteenth and early twentieth centuries usually found a warm welcome from people eager to hear of the latest trends in leading nations. The immigrants to the country were similarly accepted quite readily, and those who were successful rapidly gained entry into the highest social circles. One result was a disproportionate number of non-Iberian names among the Chilean upper classes. Moreover, many Chileans, the wealthy as well as artists, writers, scientists, and politicians, found it virtually obligatory to make the long voyage to experience firsthand the major cities of Europe and the United States, and they rapidly absorbed whatever new notions were emerging in more advanced nations.
At the same time, Chile's physical isolation probably buttressed the commitment of the nation's leaders in all walks of life to building strong national institutions, which then developed their peculiarly Chilean modalities. For example, the rich could not easily envision sending their children to universities in Europe or the United States, and this created a demand that would not otherwise have existed for strong domestic centers of higher learning. A feeling of pride in these various institutions soon developed that contributed to Chile's strong sense of national identity.
This combination of openness to outside influences and commitment to the nation is undoubtedly related to the relative "modernity" that has been a feature of Chilean life since independence from Spain. From the very first national administrations, there was a strong expression of commitment to expanding the availability of education to both boys and girls, principally at the primary level. The University of Chile was established by the national government in 1842 and soon had a large, centrally located building in Santiago. In a matter of decades, the University of Chile became one of the most respected institutions of higher learning in Latin America. Women were admitted to the University of Chile beginning in 1877, making it a world pioneer coeducational instruction; by 1932 about a third of the university's enrollment was female.
In the Americas, Chile was second only to Uruguay in creating state-run welfare institutions, adopting a relatively comprehensive social security system in 1924, more than a decade before the United States. A national health system was created by pooling existing state-founded institutions into a comprehensive organization in 1952. Under this program, curative and emergency care were provided free of charge to workers and poor people; in the early 1960s, preventive care became available to all infants and mothers.
However, inadequate development of the economy undermined Chile's relatively modern institutional edifice. The lack of resources often led to sharp conflicts between different groups trying to obtain larger pieces of a meager pie. As better placed and politically more influential groups were able to draw disproportionate benefits for themselves, inequalities were generated, as was made apparent by the wide disparities in the pension benefits that were paid by the state-run system. Despite the government's early commitment to public education, budgetary limitations meant that illiteracy decreased very slowly. By 1930 about a quarter of the adult population still could not read or write, a low proportion by Latin American standards but a far cry from the universal literacy existing at the time in France, Germany, and Belgium, whose educational systems had served as models for Chilean public education. Primary school attendance only approached universal levels in the 1960s, and full adult literacy was not achieved until the 1980s. The lack of educational opportunities limited social mobility, and investments in new technologies often ran into the difficulty of not having properly trained workers. The nation's industries, mines, and farms had at their disposal a large pool of unskilled or semiskilled workers, and for most jobs the wages, benefits, and working conditions were generally deplorable. On numerous occasions, worker demands met with heavy-handed repression, and class divisions became deep fault lines in Chilean society.
The military government that took over after the bloody coup of 1973 embarked on a different course from that followed by the country's governments over the previous half-century. Based on economic neoliberalism, the military regime's primary objectives were to reduce the size of the state and limit its intervention in national institutions. Most state-owned industries and the staterun social security system were privatized, private education at all levels was encouraged, and labor laws limiting union rights were enacted. Although new programs enhancing prior efforts to deal with the poorest segments of the population were successfully put into place, the authoritarian regime's overall social and economic policies led to increased inequalities.
At the start of the 1990s, Chile began to recover its democratic institutions under the elected government of Patricio Aylwin Azócar (president, 1990-94). Committed to redressing the social inequalities that had developed under the military regime, the new government redirected more resources to programs and institutions in education and health in order to improve their quality and the population's access to them. Although the Aylwin administration made some changes in these institutions, there was no attempt to undo the privatization of the social security system, which was now based on individual capitalization schemes rather than on the old state-run, pay-as-you-go system.
In 1993 and early 1994, there was a sharp sense of optimism regarding the Chilean economy. High rates of economic growth were expected to last through the 1990s. With its newfound economic dynamism, Chile seemed poised in the early 1990s to begin resolving the long-standing incongruity of a relatively advanced social and political system coexisting with a scarcity of means.
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GEOGRAPHY
A Long, Narrow Nation
In a classic book on the natural setting and people of Chile, Benjamín Subercaseaux Zañartu, a Chilean writer, describes the country's geography as loca (crazy). The book's English translator renders this term as "extravagant." Whether crazy or extravagant, there is little question that Chile's territorial shape is certainly among the world's most unusual. From north to south, Chile extends 4,270 kilometers, and yet it only averages 177 kilometers east to west. On a map, Chile looks like a long ribbon reaching from the middle of South America's west coast straight down to the southern tip of the continent, where it curves slightly eastward. Cape Horn, the southernmost point in the Americas, where the Pacific and Atlantic oceans turbulently meet, is Chilean territory. Chile's northern neighbors are Peru and Bolivia, and its border with Argentina to the east, at 5,150 kilometers, is one of the world's longest (see fig. 4).
Chile's shape was determined by the fact that it began as a Spanish settlement on the western side of the mighty cordillera of the Andes, in the central part of the country. This range, which includes the two tallest peaks in the Americas--Aconcagua (6,959 meters) and Nevado Ojos del Salado (6,880 meters)--is a formidable barrier, whose passes to the Argentine side are covered by a heavy blanket of snow during the winter months. As a result, Chile could expand beyond its original colonial territory only to the south and north. The colony grew southward by occupying lands populated by indigenous groups, and it grew northward by occupying sections of both Peru and Bolivia that were eventually awarded to Chile in the aftermath of the War of the Pacific (1879-83).
The northern two-thirds of Chile lie on top of the telluric Nazca Plate, which, moving eastward about ten centimeters a year, is forcing its way under the continental plate of South America. This movement has resulted in the formation of the Peru-Chile Trench, which lies beyond a narrow band of coastal waters off the northern two-thirds of the country. The trench is about 150 kilometers wide and averages about 5,000 meters in depth. At its deepest point, just north of the port of Antofagasta, it plunges to 8,066 meters. Although the ocean's surface obscures this fact, most of Chile lies at the edge of a profound precipice.
The same telluric displacements that created the Peru-Chile Trench make the country highly prone to earthquakes. During the twentieth century, Chile has been struck by twenty-eight major earthquakes, all with a force greater than 6.9 on the Richter scale (see Glossary). The strongest of these occurred in 1906 (registering an estimated 8.4 on the Richter scale) and in 1960 (reaching 8.75). This latter earthquake occurred on May 22, the day after another major quake measuring 7.25 on the Richter scale, and covered an extensive section of south-central Chile. It caused a tidal wave that decimated several fishing villages in the south and raised or lowered sections of the coast as much as two meters. The clash between the earth's surface plates has also generated the Andes, a geologically young mountain range that, in Chilean territory alone, includes about 620 volcanoes, many of them active. Almost sixty of these had erupted in the twentieth century by the early 1990s. More than half of Chile's land surface is volcanic in origin.
About 80 percent of the land in Chile is made up of mountains of some form or other. Most Chileans live near or on these mountains. The majestically snowcapped Andes and their precordillera elevations provide an ever-present backdrop to much of the scenery, but there are other, albeit less formidable, mountains as well. Although they seemingly can appear anywhere, the non-Andean mountains usually form part of transverse and coastal ranges. The former, located most characteristically in the near north and the far north natural regions, extend with various shapes from the Andes to the ocean, creating valleys with an east-west direction. The latter are evident mainly in the center of the country and create what is commonly called the Central Valley (Valle Central) between them and the Andes. In the far south, the Central Valley runs into the ocean's waters. At this location, the higher elevations of the coastal range facing the Andes become a multiplicity of islands, forming an intricate labyrinth of channels and fjords that have been an enduring challenge to maritime navigators.
Much of Chile's coastline is rugged, with surf that seems to explode against the rocks lying at the feet of high bluffs. This collision of land and sea gives way every so often to lovely beaches of various lengths, some of them encased by the bluffs. The Humboldt current, which originates northwest of the Antarctic Peninsula (which just into the Bellingshausen Sea) and runs the full length of the Chilean coast, makes the water frigid. Swimming at Chile's popular beaches in the central part of the country, where the water gets no warmer than 15° C in the summer, requires more than a bit of fortitude.
Chilean territory extends as far west as Polynesia. The best known of Chile's Pacific Islands is Easter Island (Isla de Pascua, also known by its Polynesian name of Rapa Nui), with a population of 2,800 people. Located 3,600 kilometers west of Chile's mainland port of Caldera, just below the Tropic of Capricorn, Easter Island provides Chile a gateway to the Pacific. It is noted for its 867 monoliths (Moais), which are huge (up to twenty meters high) and mysterious, expressionless faces sculpted of volcanic stone (see fig. 5). The Islas Juan Fernández, located 587 kilometers west of Valparaíso, are the locale of a small fishing settlement. They are famous for their lobster and the fact that one of the islands, Isla Robinson Crusoe, is where Alexander Selkirk, the inspiration for Daniel Defoe's novel, was marooned for about four years.
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Natural Regions
Chile may have a "crazy" geography, but it is also a land of unparalleled beauty, with an incredible variety that has fascinated visitors since the Spanish conquest. Because Chile extends from a point about 625 kilometers north of the Tropic of Capricorn to a point hardly more than 1,400 kilometers north of the Antarctic Circle, within its territory can be found a broad selection of the earth's climates. For this reason, geographically it is possible to speak of several Chiles. The country usually is divided by geographers into five regions: the far north, the near north, central Chile, the south, and the far south. Each has its own characteristic vegetation, fauna, climate, and, despite the omnipresence of both the Andes and the Pacific, its own distinct topography.
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The Far North
The far north (Norte Grande), which extends from the Peruvian border to about 27° south latitude, a line roughly paralleled by the Río Copiapó, is extremely arid. It contains the Atacama Desert, one of the driest areas in the world; in certain sections, this desert does not register any rainfall at all. Average monthly temperatures range at sea level between about 20.5° C during the summer and about 14° C during the winter. Most of the population lives in the coastal area, where the temperatures are more moderate and the humidity higher. Contrary to the image of monochrome barrenness that most people associate with deserts, the landscape is spectacular, with its crisscrossing hills and mountains of all shapes and sizes, each with a unique color and hue depending on its mineral composition, its distance from the observer, and the time of day.
In the far north, the land generally rises vertically from the ocean, sometimes to elevations well over 1,000 meters. The Cordillera Domeyko in the north runs along the coast parallel to the Andes. This topography generates coastal microclimates because the fog that frequently forms over the cold ocean waters, as well as any low clouds, is trapped by the high bluffs. This airborne moisture condenses in the spines and leaves of the vegetation, droplets that fall to the ground and irrigate the plants' roots. Beyond the coastal bluffs, there is an area of rolling hills that encompasses the driest desert land; this area ends to the east with the Andes towering over it. The edges of the desert in some sections have subterranean aquifers that have permitted the development of forests made up mainly of tamarugos, spiny trees native to the area that grow to a height of about twenty-five meters. Most of those forests were cut down to fuel the fires of the many foundries established since colonial times to exploit the abundant deposits of copper, silver, and nitrate found in the area. The result was the creation of even drier surface conditions.
The far north is the only part of the country in which there is a large section of the Andean (plateau). The area receives considerable rainfall during the summer months in what is commonly known as the "Bolivian winter," forming shallow lakes of mostly saline waters that are home to a number of bird species, including the Chilean flamingo. Some of the water from the plateau trickles down the Andes in the form of narrow rivers, many of which form oases before being lost to evaporation or absorption into the desert sands, salt beds, and aquifers. However, some rivers do manage to reach into the Pacific, including the Río Loa, whose U-shaped course across the desert makes it Chile's longest river. The water rights for one of the rivers, the Río Lauca, remain a source of dispute between Bolivia and Chile. These narrow rivers have carved fertile valleys in which an exuberant vegetation creates a stark contrast to the bone-dry hills. In such areas, roads usually are built half way up the arid elevations in order to maximize the intensive agricultural use of the irrigated land. They offer spectacular panoramic vistas, along with the harrowing experience of driving along the edges of cliffs.
In the far north, the kinds of fruits that grow well in the arid tropics thrive, and all kinds of vegetables can be grown year-round. However, the region's main economic foundation is its great mineral wealth. For instance, Chuquicamata, the world's largest open-pit copper mine, is located in the far north. Since the early 1970s, the fishing industry has also developed enormously in the main ports of the area, most notably Iquique and Antofagasta (see The Current Structure of the Economy , ch. 3).
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The Near North
The near north (Norte Chico) extends from the Río Copiapó to about 32° south latitude, or just north of Santiago. It is a semiarid region whose central area receives an average of about twenty-five millimeters of rain during each of the four winter months, with trace amounts the rest of the year. The near north is also subject to droughts. The temperatures are moderate, with an average of 18.5° C during the summer and about 12° C during the winter at sea level. The winter rains and the melting of the snow that accumulates on the Andes produce rivers whose flow varies with the seasons, but which carry water year round. Their deep transverse valleys provide broad areas for cattle raising and, most important, fruit growing, an activity that has developed greatly since the mid-1970s.
As in the for north, the coastal areas of the near north have a distinct microclimate. In those sections where the airborne moisture of the sea is trapped by high bluffs overlooking the ocean, temperate rain forests develop as the vegetation precipitates the vapor in the form of a misty rain. Because the river valleys provide breaks in the coastal elevations, maritime moisture can penetrate inland and further decrease the generally arid climate in those valleys. The higher elevations in the interior sections are covered with shrubs and cacti of various kinds.
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Central Chile
Central Chile (Chile Central), home to a majority of the population, includes the three largest metropolitan areas-- Santiago, Valparaíso, and Concepción. It extends from about 32° south latitude to about 38° south latitude. The climate is of the temperate Mediterranean type, with the amount of rainfall increasing considerably and progressively from north to south. In the Santiago area, the average monthly temperatures are about 19.5° C in the summer months of January and February and 7.5° C in the winter months of June and July. The average monthly precipitation is no more than a trace in January and February and 69.7 millimeters in June and July. By contrast, in Concepción the average monthly temperatures are somewhat lower in the summer at 17.6° C but higher in the winter at 9.3° C, and the amount of rain is much greater. In the summer, Concepción receives an average of twenty millimeters of rain per month; in June and July, the city is pounded by an average of 253 millimeters per month. The numerous rivers greatly increase their flow as a result of the winter rains and the spring melting of the Andean snows, and they contract considerably in the summer. The combination of abundant snow in the Andes and relatively moderate winter temperatures creates excellent conditions for Alpine skiing.
The topography of central Chile includes a coastal range of mountains running parallel to the Andes. Lying between the two mountain ranges is the so-called Central Valley, which contains some of the richest agricultural land in the country, especially in its northern portion. The area just north and south of Santiago is a large producer of fruits, including the grapes from which the best Chilean wines are made. Exports of fresh fruit began to rise dramatically in the mid-1970s because Chilean growers had the advantage of being able to reach markets in the Northern Hemisphere during that part of the world's winter. Most of these exports, such as grapes, apples, and peaches, go by refrigerator ships, but some, such as berries, go by air freight.
The southern portion of central Chile contains a mixture of some excellent agricultural lands, many of which were covered originally with old-growth forests. They were cleared for agriculture but were soon exhausted of their organic matter and left to erode. Large tracts of this worn-out land, many of them on hilly terrain, have been reforested for the lumber, especially for the cellulose and paper industries. New investments during the 1980s in these industries transformed the rural economy of the region. The pre-Andean highlands and some of the taller and more massive mountains in the coastal range (principally the Cordillera de Nahuelbuta) still contain large tracts of old-growth forests of remarkable beauty, some of which have been set aside as national parks. Between the coastal mountains and the ocean, many areas of central Chile contain stretches of land that are lower than the Central Valley and are generally quite flat. The longest beaches can be found in such sections.
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The South
Although many lovely lakes can be found in the Andean and coastal regions of central Chile, the south (Sur de Chile) is definitely the country's most lacustrine area. Southern Chile stretches from below the Río Bío-Bío at about 38° south latitude to below Isla de Chiloé at about 43.4° south latitude. In this lake district of Chile, the valley between the Andes and the coastal range is closer to sea level, and the hundreds of rivers that descend from the Andes form lakes, some quite large, as they reach the lower elevations. They drain into the ocean through other rivers, some of which (principally the Río Calle Calle, which flows by the city of Valdivia) are the only ones in the whole country that are navigable for any stretch. The Central Valley's southernmost portion is submerged in the ocean and forms the Golfo de Ancud. Isla de Chiloé, with its rolling hills, is the last important elevation of the coastal range of mountains.
The south is one of the rainiest areas in the world. One of the wettest spots in the region is Valdivia, with an annual rainfall of 2,535.4 millimeters. The summer months of January and February are the driest, with a monthly average precipitation of sixty-seven millimeters. The winter months of June and July each produce on average a deluge of 410.6 millimeters. Temperatures in the area are moderate. In Valdivia, the two summer months average 16.7° C, whereas the winter months average 7.9° C.
The lakes in this region are remarkably beautiful. The snowcovered Andes form a constant backdrop to vistas of clear blue or even turquoise waters, as at Lago Todos los Santos. The rivers that descend from the Andes rush over volcanic rocks, forming numerous white-water sections and waterfalls. The vegetation, including many ferns in the shady areas, is a lush green. Some sections still consist of old-growth forests, and in all seasons, but especially in the spring and summer, there are plenty of wildflowers and flowering trees. The pastures in the northernmost section, around Osorno, are well suited for raising cattle; milk, cheese, and butter are important products of that area. All kinds of berries grow in the area, some of which are exported, and freshwater farming of various species of trout and salmon has developed, with cultivators taking advantage of the abundant supply of clear running water. The lumber industry is also important. A number of tourists, mainly Chileans and Argentines, visit the area during the summer.
Many of Chile's distinctive animal species have been decimated as they have been pushed farther and farther into the remaining wilderness areas by human occupation of the land. This is the case with the huemul, a large deer, and the Chilean condor, the largest bird of its kind; both animals are on the national coat of arms. The remaining Chilean pumas, which are bigger than their California cousins, have been driven to isolated national parks in the south by farmers who continue to hunt them because they occasionally kill sheep and goats.
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The Far South
In the far south (Chile Austral), which extends from between 43° south latitude and 44° south latitude to Cape Horn, the Andes and the South Pacific meet. The continental coastline features numerous inlets and fjords, from which the mountains seem to rise straight up to great elevations; this is, for example, the case with the Cerro Macá (2,960 meters) near Puerto Aisén. The rest of the land consists of literally thousands of islands forming numerous archipelagos interwoven with sometimes-narrow channels, which provide the main routes of navigation.
In the northern part of the far south, there is still plenty of rainfall. For instance, Puerto Aisén, at 45°24' south latitude, receives 2,973.3 millimeters of rain per year. However, unlike in Valdivia, the rain falls more or less evenly throughout the year in Puerto Aisén. The summer months average 206.1 millimeters, whereas the winter months average 300 millimeters. The temperatures at sea level in Puerto Aisén average 13.6° C in the summer months and 4.7° C in the winter months. Although the area generally is chilly and wet, the combination of channels, fjords, snowcapped mountains, and islands of all shapes and sizes within such a narrow space makes for breathtaking views. The area is still heavily forested, although some of the native species of trees that grow in the central and southern parts of the country have given way to others better adapted to a generally colder climate.
The southern part of the far south includes the city of Punta Arenas, which, with about 125,000 inhabitants, is the southernmost city of any appreciable size in the world. It receives much less precipitation; its annual total is only 438.5 millimeters, or a little more than what Valdivia receives in the month of June alone. This precipitation is distributed more or less evenly throughout the year, with the two main summer months receiving a monthly average of thirty-one millimeters and the winter months 38.9 millimeters, some of it in the form of snow. Temperatures are colder than in the rest of the country. The summer months average 11.1° C, and the winter months average 2.5° C. The virtually constant wind from the South Pacific Ocean makes the air feel much colder.
The far south contains large expanses of pastures that are best suited for raising sheep. The area's other main economic activity is oil and natural gas extraction from the areas around the Strait of Magellan. This strait is one of the world's important sea-lanes because it unites the Atlantic and Pacific oceans through a channel that avoids the rough open waters off Cape Horn. The channel is perilous, however, and Chilean pilots guide all vessels through it.
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THE PEOPLE
Formation of the Chilean People
To a traveler arriving in Santiago from Lima, Chileans will in general seem more Latin European-looking than Peruvians. By contrast, to a visitor arriving from Buenos Aires, certain native American features will seem apparent in large numbers of Chileans in contrast to Argentines. These differing perspectives can be explained by tracing the distinctive historical roots of the Chilean people.
The Spaniards who settled in the pleasant Central Valley of what is now Chile beginning in the late sixteenth century found no rich lodes of gold or silver to exploit, and therefore saw no need for employing masses of indigenous forced laborers such as those who were put to work in the Andean highlands and in the mines of Mexico. Although copper mining became an important part of the late colonial economy, even the most successful of operations employed no more than a few salaried workers. Settlers took to developing the agricultural potential of the land, which, given Chile's climate, was well suited for growing the crops they knew from the Old World. This seasonal form of farming was different from that practiced in semitropical plantations in that it required few workers except during the harvest. As a result, the Spanish settlers in Chile did not seek to force large numbers of native Americans to toil for them, and they had little use for slaves. Relatively few enslaved Africans were brought into Chile and slavery was abolished soon after the country declared its independence from Spain in 1818.
The Spaniards encountered fierce resistance to their occupation efforts from one of the main indigenous groups, the Araucanians, who lived in the south-central part of the country. The settlers managed to take control of the land down to the Río Bío-Bío and to establish strongholds farther south, but throughout the colonial period the area that is now Chile consisted of two distinct nations: one a poor outpost of the Spanish Empire and the other an independent territory, Arauco, occupied by the Araucanians, whose territory consisted of most of south-central Chile between the Río Bío-Bío and the coastal areas around Temuco. By the end of the colonial period, the Araucanian territories had been reduced, but they had not been fully incorporated into Spanish rule. The indigenous wars lasted for more than three centuries, with a final skirmish in 1882.
Although warfare and the diseases brought by the Spaniards decimated the native population, Spain found it necessary to keep sending soldiers to protect its distant colony. They came from all regions of Spain, including the Basque country, and many of them ended up settling in Chile. The combination of an economy based on temperate-zone agriculture, native American resistance to Spanish occupation, and a continuous influx of Spaniards from the midsixteenth century to the end of the colonial period defined the main body of the Chilean population--a mixture of native American and Spanish blood, but one in which the Spanish element is greater than in the other Andean mestizo populations.
During the nineteenth century, the newly independent government sought to stimulate European immigration. Beginning in 1845, it had some success in attracting primarily German migrants to the Chilean south, principally to the lake district. For this reason, that area of the country still shows a German influence in its architecture and cuisine, and German (peppered with archaic expressions and intonations) is still spoken by some descendants of these migrants. People from England and Scotland also came to Chile, and some established export-import businesses of the kind that the Spanish crown previously had kept at bay. Other European immigrants, especially northern Italians, French, Swiss, and Croats, came at the end of the nineteenth century. More Spaniards and Italians, East European Jews, and mainly Christian Lebanese, Palestinians, and Syrians came in the decades before World War II. Many of these immigrants became prominent entrepreneurs or professionals, and their numbers never exceeded 10 percent of the total population at any given time. Thus, in contrast to Argentina, whose population was transformed around the turn of the century by numerous European immigrants, especially Italians, the Chilean population continued to be defined by the original Spanish and native American mixture. Acculturation was fairly rapid for all immigrant groups. Because second-generation residents saw themselves primarily as Chileans, ethnic identities had little impact on national society.
Chileans of all color gradations between the fair northern European and the darker native American complexion can be found, although most have brown hair or dark brown hair and brown eyes. There have been no really salient racial distinctions affecting daily life and politics in Chile, but there is unquestionably a strong correlation between high socioeconomic status and light skin.
The social definition of who is a native has not depended so much on phenotypical characteristics as on cultural ones. This means that Chileans generally have considered someone to be a native only if, in addition to native American features, he or she has an indigenous last name, wears native clothing, speak a native language, or resides in a native community. Consequently, the native Americans who wish to assimilate fully into Chilean society often take Spanish surnames after moving out of reservations.
The term Mapuche ("people of the land") now encompasses most of the native Chilean groups. The number of Mapuche residing on the reservations that were set up beginning in the late 1880s has declined in recent years. About 300,000 were counted as living in the reservations by the 1982 census. The 1992 census asked respondents to identify themselves ethnically as Mapuche, Aymara (the native population of northern Chile whose main trunk lies in Bolivia), Rapa Nui (the Polynesian group that lives in or originates from Easter Island), and other. The results showed that 9.6 percent of the population over age fourteen self-identified as Mapuche, 0.5 percent as Aymara, and less than 0.25 percent as Rapa Nui (see table 2, Appendix). This means that about 1.3 million Chileans are native Americans, mainly Mapuche, or the descendants of one of the fourteen or so different tribal groups that occupied what is now Chile before the Spanish conquest.
Although indigenous culture was most strongly retained on the reservations, penetration by Chilean national culture was also extensive. For example, research on a sample of Mapuche living on four reservations in the south showed that only 8.5 percent of them were monolingual Mapuche (sometimes call Mapudungu) speakers; 50.7 percent lived in homes where both Spanish and Mapuche were spoken, and 40.8 percent lived in homes where only Spanish was spoken. This situation was largely a result of the extension of primary rural education. Of all Mapuche over fifteen years of age living on the same reservations that were studied, 81 percent had gone to school for at least one year (85.5 percent of the men and 76.2 percent of the women). Significant differences in schooling by age among the Mapuche reveal how wide the reach of rural education has been in recent years. In the sampled reservation communities, the literacy rate was 81.2 percent for all residents over five years of age, and yet the rate was more than 96.2 percent for the age-group between ages ten and thirty-four. The acquisition of language and literacy skills is, of course, a principal means of acculturation.
With the partial exception of the indigenous groups, the Chilean population perceives itself as essentially homogeneous. Despite the configuration of the national territory, regional differences and sentiments are remarkably muted. Even the Spanish accent of Chileans varies only very slightly from north to south; more noticeable are the small differences in accent based on social class or whether one lives in the city or the country. The fact that the Chilean population essentially was formed in a relatively small section of the center of the country and then migrated in modest numbers to the north and south helps explain this relative lack of differentiation, which is now maintained by the national reach of radio and especially of television. The media diffuse and homogenize colloquial expressions.
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Current Demographic Profile
A new decennial census was taken in 1992. Some of its data were already available officially as of this writing, but other data were still in the process of being tabulated. The total population was officially given as 13,348,401, of which 6,553,254 were male and 6,795,147 were female (see table 3, Appendix). According to that data, the average population density in 1992 remained 17.6 inhabitants per square kilometer. Population density varied greatly, however, from the sparsely populated far north and far south to the much more densely inhabited central Chile (see table 4, Appendix). In 1993 the figure rose to 18 inhabitants per square kilometer. The new total population figure shows that the growth of the population in the ten years between the 1982 and the 1992 censuses was about 1.7 percent per annum.
The National Statistics Institute (Instituto Nacional de Estadísticas--IME) estimated the birthrate in 1991 at 22.4 per 1,000 population, an increase over 1985, when the rate stood at 21.6 per 1,000. This has led to a corresponding widening of the base of the age pyramid of the population, which had narrowed significantly with the decline in the birthrate that began in the mid- to late 1960s (see fig. 6). The current increase in the birthrate is a slight demographic echo of the birth control programs that began in the mid-1960s. These programs reduced the fertility of women of childbearing age, causing the original drop in the birthrate, whereas the rise in the early 1990s resulted from children born to new generations of women who have reached the childbearing period of their lives. Whereas women of childbearing age (fourteen to forty-nine years) had had an average of 4.09 children in 1967; by 1992 this average had dropped to 2.39.
With the declining birthrate and no significant increase in immigration, much of the growth in the Chilean population over the 1970s and 1980s resulted from a decline in mortality. The mortality rate in 1992 was estimated at 5.6 per 1,000 population, whereas in 1960 it had been more than twice that, at 12.5 per 1,000. In 1990 life expectancy at birth was estimated at 71.0 years (sixty-eight for men and seventy-five for women), up from the 1960 figure of 57.1 years (57.6 for men and 63.7 for women). These improvements resulted in part from better health care beyond the first year of life, but they are explained primarily by a dramatic decline in infant mortality during the 1960-90 period. In 1960 infant mortality was 119.5 per 1,000 live births, and by 1991 it had declined to 14.6 per 1,000. This latter rate, one of the lowest in Latin America, indicated the success of the various health programs for expectant mothers and infants implemented since the late 1960s. In the early 1990s, the Chilean population was older than it has been in the 1960s. The 1982 census revealed for the first time ever that the population included a majority of adults over twenty-one years of age. Yet it was still a very young population: 49 percent of Chileans were estimated in 1991 to be less than twenty-four years of age.
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URBAN AREAS
Since the 1930s, the majority of Chileans has lived in urban areas (defined as agglomerations of more than 2,000 inhabitants). This reflects a demographic trend of migration from rural areas that began early, according to developing world and Latin American standards. The urban population was estimated to be 86 percent of the total in 1991. A perhaps better indicator of the degree of urbanization of a country is the extent to which the population lives in agglomerations of more than 20,000. According to the 1982 census, there were fifty-one cities and towns in Chile with more than 20,000 inhabitants, and their combined population represented 65.6 percent of the total. This percentage shows that Chile is very definitely an urban country. There has continued to be a significant internal migration of the population, although mostly from one urban center to another. The 1982 census showed that a significant 8.6 percent of the population had moved to the province of current residence during the previous five years.
Central Chile is the site of the oldest urban centers, many of which were founded by the Spanish in the mid-sixteenth century. Most of the older cities are next to rivers in areas of rich soil. Santiago, founded in 1541, is typical of this pattern of settlement in a prime agricultural area. Little did its founders know that city streets and houses would occupy so much of the Santiago Valley's fertile soil in the twentieth century. Santiago was designated from its founding as the capital city of the new colony, and it has been the seat of the Chilean government ever since. Other cities, such as Valparaíso, founded in 1536, served as ports. The city of Concepción--founded in 1550 in what is now Penco and moved a bit inland to its present location in 1754--served as the center of a wheat-growing area, as a port for the southern part of the Central Valley, and as a military base on the Araucanian frontier.
Despite being continually populated for more than four centuries, Chilean cities have--unlike Lima or Cartagena, for instance--few architectural monuments from the past. This is explained in part by the poverty of the country in colonial times but also by the devastating action of the frequent earthquakes. Following the usual Spanish colonial practice, Chilean cities were planned with a central plaza surrounded by a grid of streets forming square blocks. The plazas invariably were the site of both municipal or regional government buildings and churches.
Communications between urban centers were facilitated during the colonial period by the relative proximity to the ocean of even the most Andean of locations. Except for cities in the Central Valley, between Santiago and Chillán, ocean transportation and shipping were vital to the north-south movement of people and goods until the building of railroads from the second half of the nineteenth century until the first decades of the twentieth century. Even then, the railroads only served the central and southern parts of the country to Puerto Montt, leaving sea-lanes as the main links to the extreme north and south.
The most significant feature of the development of urban centers in Chile has been the imbalance represented by the growth of Santiago, which has far exceeded that of other cities. According to the 1992 census figures, the Metropolitan Region of Santiago had about 5,170,300 inhabitants, a total equal to about 39 percent of the Chilean population. In 1865, with a population of about 115,400, Santiago was the residence of only 6.3 percent of the nation's inhabitants. From about 1885 onward, the capital city grew at a rate between about 30 percent and 50 percent every ten to twelve years (see table 5, Appendix). The 1992 census figure showed a slight moderation of this pace, which was, nonetheless, at 3.3 percent per year significantly higher than the average national population increase.
Santiago's population growth occurred mainly as a result of migration from rural areas and provincial urban centers. Almost 30 percent of the population of the capital in 1970 was born in areas of Chile other than Santiago, a percentage that has probably not changed much since. The only other areas of the country that have greatly increased their population in recent years are the extreme south and the extreme north. This growth has resulted from internal migration prompted by economic expansion associated with fishing and mining. However, given the much smaller populations in those areas to begin with, the fact that between 30 percent and 40 percent of their inhabitants were born elsewhere does not signify much in terms of the absolute numbers of people migrating.
Santiago is not only the seat of the national government (except for the National Congress, hereafter Congress, now located in Valparaíso) but also the nation's main financial and commercial center, the most important location for educational, cultural, and scientific institutions, and the leading city for manufacturing in terms of the total volume of production. Although sprawling Santiago has continued to absorb formerly prime agricultural areas, there are sections of town where wineries still cultivate grapes.
Historically, Santiago has been the main area of residence for the nation's wealthiest citizens, even for those with property elsewhere in the country. Unlike other Chilean cities, Santiago has always had an extensive upper- and upper-middle class residential area. Originally near the main plaza in the center of town, this area developed toward the south and west at the end of the nineteenth century and the beginning of the twentieth century. Although neighborhoods in these areas retained some samples of the architecture of that period, by the 1990s they were occupied mainly by lower-middle-class residents. Beginning in the 1930s, Santiago's upper-class residents moved east of the center of town, toward the Andes. This transition was accompanied by an increase in the commercial use of downtown as larger and larger buildings were constructed and the public transportation system was enhanced. As use of the automobile became more common, the upper-class and upper-middle-class residential areas expanded farther up the foothills of the Andes. This process of suburbanization, complete with shopping malls and supermarkets with large parking lots, also has led to the development of new and faster roads to the center of the city and to the principal airport. New bus lines also were established to serve the suburbs. All of this increased motor- vehicle traffic in the Santiago Valley, whose surrounding mountains trap particulate matter, generating levels of air pollution that are among the worst in the world. In the early 1990s, emergency restrictions on the use of motor vehicles have become a routine feature of the city's life during all but the summer months, when there is more wind and the thermal inversion that traps the dirty air in the colder months no longer prevents its venting.
The large number of people migrating to Santiago and, to a lesser extent, to other major cities, led to a severe shortage of housing, especially of affordable housing for low-income people. Estimates in 1990 were that the nation as a whole needed a million more housing units to accommodate all those living in crowded conditions with relatives or friends, those with housing in poor condition, or those living in emergency housing. Since the 1960s, extensive portions of the Santiago area, especially to the south, east, and north of the center, had been occupied by people who built precarious makeshift housing on lots that were often used illegally. As these areas aged, the municipal authorities extended city services to them and tried to redesign, where need be, their haphazard layout. Moreover, many people--about 28,000 between 1979 and 1984--were moved out of illegal settlements by the authorities and into low-income housing. The result was a further expansion of urbanization and an increase in the distances that people had to travel to work, look for work, or attend school. Nonetheless, by 1990 virtually all of the poorer areas of Santiago had access to electricity, running water, refuse collection, and sewerage. In fact, the country's urban population as a whole had good access to city services. By 1987, 98 percent of the population in towns and cities had running water (the great majority in their homes), 98 percent had garbage collection, and 79 percent had sewer connections.
The segregation within Chilean cities by income level has made residential areas very different from one another. In Santiago, where the differences are more sharply drawn than elsewhere, some neighborhoods are worlds apart. The upper-class areas in the eastern foothills of the Andes offer comfortable houses with neat, fenced-in gardens, or spacious apartments in sometimes attractively designed buildings, all on tree-lined streets. Restaurants, supermarkets, shopping malls, boutiques, bookstores, cinemas, and theaters add to the appeal of what is a very comfortable urban life. The area is well connected by public transportation, including the major east-west line of an excellent subway and its feeder buses. The best hospitals and clinics are within easy reach, as are the best private schools.
The poor areas of the city are not as well served. There are few supermarkets, and the usually poorly stocked corner groceries often sell their goods at higher prices. Some streets are not paved, and this, together with the lack of grass cover in the open spaces, creates dusty conditions during much of the year. Trees have been planted extensively in Santiago's poorer areas since the 1960s, but many streets are still devoid of them. Getting to the city center and to clinics and hospitals is more difficult for residents of the poorer areas. However, access to preprimary schooling and to sport facilities, especially to soccer fields, has expanded significantly since the early 1970s. Except for some very plain-looking buildings with apartments for low-income families, most housing consists of one floor. The poorest houses are made of a variety of materials, including pine boards and cardboard. Houses are generally built with brick and poured-concrete braces, and most poor people eventually try to build with such materials as well. As communities begun by land-squatters have become more settled, it has been possible to see the gradual transformation of squatter construction.
Chilean cities commonly contain relatively large housing developments (poblaciones), including multifamily units, single-family units, or a combination of the two. Many of these developments were constructed with loans made available to enterprises, pension funds, or savings and loan associations by the state for their employees or affiliates, usually at subsidized rates (especially before the military government). Consequently, they are often occupied by people who have the same place of employment or who belong to a specific occupational category. Such housing would not be available as easily to large numbers of people were it not for the special financial arrangements worked out for the group. Transportation to and from work was often arranged by employers. One unintended consequence of this pattern of urbanization was that it contributed to the overall segregation of housing in Chile by income level or occupation.
However, in part because of this pattern, Chile had a large proportion of homeowners. About 60 percent of housing units were owned by their occupants. As the housing developments aged and many of the original occupants sold their houses and moved elsewhere, the developments became more socially heterogeneous. People also began to modify and remodel their houses; and new corner groceries, hairstyling salons, tailor shops, schools, churches, and other establishments emerged, giving the developments a more settled, urban look.
Because of a lack of jobs in the formal economy, many people need to make a living selling odds and ends on the streets. These people have not been counted as unemployed in official statistics because they are engaged in income-producing activities. During the military regime, the authorities attempted to organize this form of commerce by licensing stalls on the sidewalks of designated streets and by prohibiting sales elsewhere. However, there was greater demand for such stalls than there were available spaces, and they could not be erected in the most important commercial streets. Hence, many people defied the regulations and attempted to sell their goods where these activities were prohibited, risking confiscation of their wares by the police. The Aylwin government continued the policy in slightly modified form.
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RURAL AREAS
Although mining, banking, and industry have been the source of the greatest Chilean fortunes since the early nineteenth century, rural society has occupied a much more central place in the nation's history. Until the 1930s, most of the population lived in rural areas, and most upper-class families, whatever the origin of their wealth, owned rural land.
Until recently, large landholdings ( latifundios--see Glossary) were a characteristic feature of rural society. The latifundia pattern of landownership originated in the Spanish crown's early colonial practice of giving land grants, some of them huge, to soldiers involved in the conquest and to the Roman Catholic Church. By the late eighteenth century, the most important lands of the Central Valley were held in large haciendas by families with noble titles that were all inherited by the elder son under the mayorazgo system (see Glossary). All such titles were abolished with Chile's adoption of a republican form of government after independence, and new laws of inheritance eventually ended the practice of primogeniture. This led to the creation of a market for rural properties and to their division as they were inherited by family members. However, by the midtwentieth century land transfers and divisions still had not put an end to ownership of large properties.
The typical large landholding was a complex minisociety. Some of its laborers lived on the estate year-round, and they or their family members worked as needed in exchange for the right to cultivate a portion of the land for themselves and to graze their animals in specified fields. Among the rural poor, their families enjoyed better living conditions. Other workers, a majority in times of strong demand for labor, especially during the harvest, lived in rural towns and villages or on small properties they held independently (whether legally or not) at the edges of the large farms. These holdings were usually insufficient to maintain a family adequately, and its members therefore would seek employment in the large rural enterprises. When needed, other rural workers were recruited from among migrants who would come during the summer from other parts of the country. The large rural enterprises included stores where people could buy a variety of goods, chapels where priests would say mass, and dispensaries for primary medical attention. In addition to the sometimes ornate houses of the proprietors, which generally were occupied only during the summer months, there were houses for the administrators, mechanics, accountants, enologists (if wine was produced), blacksmiths, and others who constituted the professional and skilled labor forces of the enterprise.
Beginning in the 1950s, the large rural properties became the target of heightened criticism by reformist politicians and economists. They noted that the uneven distribution of land contributed to social inequality and that the large landholdings were highly inefficient agricultural producers. During the governments of presidents Eduardo Frei Montalva (1964-70), who established a reformed sector (see Glossary), and Salvador Allende Gossens (1970-73), an extensive land reform program was carried out. It basically did away with the large rural properties on prime agricultural (nonforested) lands. Thus, whereas in 1965 fully 55 percent of all agricultural lands (measured as basic irrigated hectares--BIH) were held in 4,876 properties of more than eighty hectares each, by 1973 there were only 260 such properties left, covering only 2.7 percent of all BIH. The expropriations covered 40 percent of all the nation's BIH.
The military government put an end to the agrarian reform program, as well as to the technical assistance given to the beneficiaries of the expropriations. It also returned to previous owners some of the land that had not yet been formally transferred. In addition, it distributed individual titles among residents of the peasant communities sponsored by the Allende government's agrarian reform program. Moreover, the military government permitted the sale of any rural property, including the small family farms created by the agrarian reform. This policy led to new changes in land tenancy, which did not, however, reconstitute the large landholdings to the same extent as before the agrarian reform. Instead, it favored an expansion of medium-sized holdings. After all the changes, very small holdings of less than five hectares still accounted for about 10 percent of agricultural area. The largest holdings, of more than eighty hectares, were far from restored to their prior importance, at only 18 percent of the total area. If a primary purpose of the agrarian reform had been to create a better distribution of the agricultural land, after much turmoil and change the data indicate that this had been achieved (see table 6, Appendix).
The remarkable transformations in land tenancy that started in the mid-1960s were accompanied by other great changes in agriculture. These led to much more intensive land use, with the accelerated incorporation of modern technologies. Labor-service tenancy and share-cropping arrangements as a source of agricultural labor have disappeared from commercial farming, substituted by wage-earning workers living mainly in towns or small rural properties. The number of self-employed workers in agriculture has also increased with the land tenancy changes.
The rural network of mainly dirt roads was expanded to permit access to new farms and logging areas. Concurrently, small-town entrepreneurs were quick to respond to new opportunities by establishing bus routes along these expanded roads, thereby facilitating the rural population's access to schools and sources of employment. By the 1980s, the peasantry was for the first time overwhelmingly literate, with attendance at primary schools by its children virtually universal (see Education , this ch.).
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THE LABOR FORCE AND INCOME LEVELS
With a lower rate of population growth, Chile's working- age population, which includes all those individuals more than fifteen and less than sixty-five years of age, represented 64 percent of the total population in 1992 (see table 7, Appendix). The laborforce participation rate, or the ratio of those in the labor force over the working-age population, was 59 percent in August 1993; of the total population, 37 percent were employed or were seeking a job. Participation rates typically differ by age and gender. The young participate in smaller proportions and join the labor force as they leave the education system. Women have traditionally participated at lower rates also. The participation rate for men was estimated at 76 percent and that for women at 32 percent in 1992. These figures had increased since the early 1980s because of the relative aging of the overall population and a proportionately greater entry of women into the labor force. In the 1980-85 period, 74 percent of men and 26 percent of women over fifteen years of age had been active in the work force.
The rate of unemployment declined steadily throughout the 1987- 91 period. The overall rate of growth in employment for the 1987-91 period was 3 percent per year. The rate was higher from 1987 to 1989 (5 percent), the period of fast recovery after the economic crisis of 1982-83. The most dynamic sectors during the 1987-89 period were construction and manufacturing, with average rates of employment growth of 20 percent and 11 percent per year, respectively. Employment creation increased by 5 percent again in 1992, and by the end of the year unemployment stood at 4.4 percent. A greater than expected increase in the size of the labor force, mainly from women seeking employment, led to a slight increase in unemployment to 4.9 percent by late 1993.
The largest single component of the Chilean employment structure was services, a category that includes health workers, teachers, and government and domestic employees (see fig. 7; table 8, Appendix). Next was trade and financial services, including the real estate, banking, and insurance industries. Together with transportation and communications, these categories of the services sector of the economy employed 55.6 percent of the labor force. The most important of the productive activities in terms of employment was agriculture, forestry, and fishing, which employed 19.2 percent of the labor force. If mining is included, this means that 21.5 percent of the labor force was employed in what is typically considered the economy's primary sector. The manufacturing sector employed 16 percent of the labor force, roughly the same percentage as in the mid-1960s; manufacturing's share had declined to about 12 percent during the economic crisis of 1982-83. Employment in what is often considered the secondary sector of the economy amounted to 23 percent, if the percentages engaged in construction and in electricity, gas, and water were added to that in manufacturing.
In 1991 incomes had also almost recovered, for the first time in twenty years, to their 1970 average levels (see table 9, Appendix). During 1990 and the first months of 1991, workers' wages increased more rapidly than the national average. This probably resulted in some measure from the return to democracy that had enabled workers to exercise their rights more freely and from labor market conditions closer to full employment. Real incomes continued to rise during 1992 and 1993, reaching levels that surpassed the previous, but then unsustainable, peak established in 1971.
Nonetheless, the monthly wages of Chileans are, when expressed in dollars, much lower than incomes in the United States (see table 10, Appendix). According to these figures, which probably understate high incomes and overstate lower ones, an unskilled worker made less than one-tenth the amount an executive-Qoran administrator-director made. The purchasing power of these incomes for daily necessities was, however, higher than their dollardenominated equivalents suggest.
During the military government, unemployment rose well above its historical levels for the Chilean economy. There were two distinct shocks to the labor market. The first one took place around 1975 and can be related to the recessionary conditions created by anti-inflationary policies and to employment reduction in the public sector. The adjustment that followed was very slow. The second shock took place with the financial and economic crisis of 1982-83 and affected private-sector employment. From 1979 to 1981, the economy had entered into a recovery increasingly oriented toward production of nontradable goods, a pattern that was not sustainable given the speed at which international debt was being accumulated. In response to the devaluation of the Chilean peso (see Glossary) in 1982 and the macroeconomic management that followed, the economy shifted gears and reoriented production to tradable goods and services. In 1982 the unemployment rate for the country climbed to 19.4 percent, or 26.4 percent if those participating in state-financed makeshift work programs are included. Yet the adjustment that followed took place at a faster pace. By 1986 the unemployment rate was 8.8 and 13.9 percent, respectively. Chile's unemployment rate returned in the early 1990s to levels that characterized the country in the 1960s (see table 11, Appendix).
The distribution of personal income is quite regressive in Chile in general and Santiago in particular, a tendency that became more pronounced during the military government (see table 12, Appendix). The data reveal that personal income in Santiago is strongly concentrated in the highest decile, which enjoys about 40 percent of the total income. They also show that despite the great changes in the Chilean economy during this period, the distribution of personal income remains rather stable, even though a somewhat greater concentration can be seen in 1989 than in previous years. The new policies on income and taxes of the Aylwin government were expected to slightly reverse this trend (see Future Challenges of Democratic Consolidation , ch. 4).
The distribution of consumption by household in Santiago showed a strong tendency toward the concentration of expenditures in the higher-income groups during the military government. The figures for the first two years of the Aylwin government show a small change in direction toward a more equitable distribution of consumption, although it is still significantly more concentrated in the richest quintile than in 1969 (see table 13, Appendix). The data show that the richest quintile of households increased its consumption steadily from 1969 to 1989 but that it declined in 1990 and 1991. Moreover, by 1991 the bottom two quintiles had increased their share of consumption slightly at the expense of the fourth quintile. Hence, the distribution of household consumption was a bit more equal in 1991 than in 1988.
These results must be interpreted with caution. The distribution of household incomes is affected by the average number of income earners by household income levels, and in times of economic crisis the poorer segments may be forced to rely on the income of fewer household members. This apparently happened in Chile in 1983, when there were only 1.1 income earners in the poorest 20 percent of families; in the 30 percent of families with middle- to lower-middle incomes, there were 1.4 income earners; in the 30 percent of households in the middle- to high-income group, there were 1.7 income earners; and in the top 20 percent, there were two income earners per household. Because their incomes were also higher, the concentration of consumption in the high-income families was magnified. Similarly, the expansion of secondary school enrollments during the 1980s benefited the children of poorer households, but it may have deprived them of the income derived from youth employment.
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SOCIAL ORGANIZATIONS AND ASSOCIATIONS
Chileans have a remarkable facility for forming organizations and associations. This propensity perhaps has something to do with the fact that for more than three centuries both the Spanish-Chilean and the indigenous components of the country led a precarious life of conflict with each other, a situation that forced people to rely more than usual on collective organizing, especially, as was the case for both sides, given the weakness of the state. In contrast to North Americans, however, Chileans usually take a formal approach to creating organizations. In addition to electing a president, a treasurer, a secretary, and perhaps a few officers, they prefer to discuss and approve a statement of purpose and some statutes. This is a ritual even for organizations that need not register legally, obtaining what is called a "juridical personality" that will enable them to open bank accounts and to buy and sell properties. It is not known for certain where and how this formalism originated; it perhaps could be traced back to the densely legalistic approach adopted by Spain toward the governance of its faraway colonies and to the legalism of Roman Catholic canonical law, which applied to many aspects of society. Whatever grain of truth there is to these speculations, observers of Chilean society are rapidly struck by the density of its organizational life and the relatively high degree of continuity of its organizations and associations (see The Church, Business, Labor, and the Media , ch. 4).
In any Chilean community of appreciable size can be found sports clubs, mothers' clubs, neighborhood associations, parent centers linked to schools, church-related organizations, youth groups, and cultural clubs, as well as Masonic lodges and Rotary and Lions' clubs. Virtually all of the nation's fire fighters are volunteers, with the exception of members of a few fire departments in the largest cities. Government statistics greatly understate the number of community organizations because they refer mainly to those having some contact with one or another state office. According to the official estimate for 1991, there were about 22,000 such organizations, the main ones being sports clubs (6,939), neighborhood councils (6,289), mothers' clubs (4,243), and parent centers (1,362). Government publications do not report membership figures for these organizations.
Most of the important urban areas in Chile also include a broad sample of the local chapters of a wide variety of occupational associations. These include labor unions and federations, public employee and health worker organizations, business and employers' associations, and professional societies of teachers, lawyers, doctors, engineers, dentists, nurses, social workers, and other occupational groups. Membership in labor unions, which declined significantly under the military government, has been growing rapidly since the late 1980s, a change directly related to the transition to democracy. Affiliation with organizations recognized as unions in labor legislation was officially estimated in 1990 at 606,800, a 20 percent increase over 1989. That figure did not include individuals affiliated with public employee associations (including health workers), who were estimated to number about 140,000, nor the members of the primary and secondary teachers' association, who numbered about 105,000. But these two groups usually have been closely tied to the labor movement through the national confederations of labor. Thus, about 19 percent of a total labor force of 4,459,600 was linked to unions or union-like associations in 1990. With the continuing increases in union affiliations, which are especially significant in rural areas, a conservative estimate is that the unionized population (in legal as well as de facto organizations) stood in 1992 at between 22 percent and 24 percent of the labor force. The most important union confederation, which encompasses the great majority of the nation's unions and union-like organizations, is the United Labor Federation (Central Única de Trabajadores--CUT). CUT is the heir to a line of top labor confederations that can be traced back through various reorganizations and name changes to at least 1936, and perhaps to 1917 (see Unions and Labor Conflicts , ch. 3; Labor , ch. 4).
There are numerous business and employer associations in Chile. Their total membership is about 190,000, although they collectively claim to speak for about 540,000 proprietors of businesses of all sizes. The most important business organization, the Business and Production Confederation (Confederación de la Producción y del Comercio--Coproco), encompasses some of the very oldest ongoing associations in Chile: the National Agricultural Association (Sociedad Nacional de Agricultura--SNA), founded in 1838, groups the most important agricultural enterprises; the Central Chamber of Commerce (Cámara Central de Comercio), founded in 1858, includes large wholesale and retail commercial enterprises; the National Association of Mining (Sociedad Nacional de Minería), founded in 1883, affiliates the main private mining companies; the Industrial Development Association (Sociedad de Fomento Fabril--Sofofa), founded in 1883, organizes the principal manufacturing industries; the Association of Banks and Financial Institutions (Asociación de Bancos e Instituciones Financieras), founded in 1943, is the main banking-industry group; and the Chilean Construction Board (Cámara Chilena de la Construcción), founded in 1951, organizes construction companies.
Another important confederation of business groups is the Council of Production, Transport, and Commerce (Consejo de Producción, Transporte y Comercio). In contrast to Coproco, this organization groups primarily medium-sized to small businesses, including many self-employed individuals who do not hire nonfamily members on a regular basis. Its main components are the 120,000- member Trade Union Confederation of Business Retailers and Small Industry of Chile (Confederación Gremial del Comercio Detallista y de la Pequeña Industria de Chile), founded in 1938, and the 24,000- member Confederation of Truck Owners of Chile (Confederación de Dueños de Camiones de Chile), founded in 1953.
Professional societies are also well established. The largest ones, aside from the teachers' organization noted previously, are those for lawyers (about 12,000 members), physicians (about 14,500), and engineers (about 11,500). Affiliation figures for most of the more than thirty professional societies were unavailable, but there are at least 100,000 members in such associations aside from teachers. If these figures are added to those for membership in business groups and unions, it appears that about a third of the labor force is involved in occupationally based associations.
The organized groups of Chilean society have long played an important role in the nation's political life. The elections in some of them--for example, in major labor federations, among university students, or in the principal professional societies-- usually have been examined carefully for clues to the strength of the various national political parties. Most of the nation's university and professional institute students, totaling 153,100 in 1989, belong to student federations. The various associations also make their views known to state or congressional officials when issues of policy that affect them are debated.
Some associations traditionally have been identified with particular political parties. This was the case, to a greater or lesser extent, with Masons, fire fighters, teachers' federations, and the Radical Party (Partido Radical); union confederations and the parties of the left; employer associations and the parties of the right; the Roman Catholic Church, as well as its related organizations with the Conservative Party (Partido Conservador); and, in recent decades, the Christian Democratic Party (Partido Demócrata Cristiano--PDC). Many of the most militant party members have also been active in social organizations. In addition, party headquarters in local communities often have served as meeting places for all kinds of activities. The Radical clubs of small towns in the central south are especially active, often sponsoring sports clubs as well as the formation of fire departments.
Chilean social life also has definite subcultures, with the main lines of cleavage being proximity to or distance from the Roman Catholic Church and social class. The schools that parents select for their children closely reflect these subcultural divisions. The latter are also strongly mirrored in associational life, as Chileans tend to channel their sports and leisure activities into organizations within their subculture. Schools, churches, and unions contribute to this pattern by being foci for such organizing. In addition, there are some clubs and centers related to specific ethnicities, such as Arab, Italian, or Spanish clubs, even though, as noted previously, such identities traditionally have been much less salient than religion and class. Occupational associations have been an important component of class and social status identities in Chilean society, with most of them affiliating people of like occupations regardless of their religious identities or preferences. Although this has helped diminish the significance of religiously based identities, the leadership divisions and conflicts within the nation's associations can often be traced back to those subcultural differences. People's political preferences follow the subcultural lines of cleavage as well in most cases.
Social organizations did not fare well under the military government. Those that were perceived to be linked, however loosely, to the parties of the left were subjected to sometimes severe repressive measures. This was particularly the case with labor unions, whose activities were suspended for more than six years. They were only permitted to reorganize under new legislation beginning in 1979. Moreover, most associations, including those of business groups, were hardly ever consulted on policy matters, and, in the absence of normal democratic channels for exerting influence, they found their opinions and petitions falling on deaf ears. Eventually, the most prominent social organizations joined in voicing their discontent with the military government through what was called the Assembly of Civility (Asamblea de la Civilidad), and their efforts contributed to the defeat of President Augusto Pinochet Ugarte (1973-90) in the 1988 plebiscite. The only organizations that thrived under the military government were the women's aid and mothers' clubs, which were supported by government largesse and headed at the national level by Pinochet's wife, Lucía Hiriart.
With the return to democracy, social organizations recovered the ability to pressure Congress and the national government. The new government opted for explicit solicitation of the opinions of important interest associations on some of the policies it was considering. It also fostered negotiations between top labor and business leaders over issues such as labor law reforms, minimum wage and pension levels, and overall wage increases for public employees. These negotiations led to several national agreements between state officials and business and labor leaders, thereby inaugurating a new form of top-level bargaining previously unknown in Chile.
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WELFARE INSTITUTIONS AND SOCIAL PROGRAMS
Twentieth-century Chile has had an extensive system of staterun welfare programs, including those in the social security, health, and education areas. From the mid-1970s to the early 1990s, spending on all these programs ranged from as little as 19 percent to as much as 26 percent of the gross domestic product ( GDP--see Glossary), proportions that were similar to those spent in 1975 by countries belonging to the Organisation for Economic Co-operation and Development ( OECD--see Glossary). In the same period, about two-thirds of the national labor force was covered by old-age pensions and other benefits. In addition, there were universal access to curative health care and programs of preventive care for all expectant mothers, infants, and children less than six years of age who did not have recourse to alternative health care. In addition, the state-run educational system, which was open to every child at primary and secondary levels but had admissions standards for higher education, was free of charge, except for nominal matriculation fees at all levels (see Education , this ch.). The state also offered low-income housing programs at heavily subsidized rates.
Spending for these various programs increasingly outpaced revenues, as the decline in the mortality rate enhanced the dependency ratio and as the programs expanded. In addition, there were numerous programs, especially in the social security area, that provided very unequal benefits. Consequently, the military government redesigned the most important welfare institutions in ways that were consistent with its market-driven ideology, and social spending was scaled down to about 17 percent of GDP by 1989.
By the end of its first year in office, the Aylwin government increased social spending by more than US$1.5 billion over the Pinochet government's budget. The revenue came from a 4 percent increase in the higher tax rate on enterprises, from 11 percent to 15 percent; a 2 percent hike in the national value-added tax ( VAT--see Glossary) to 18 percent; and other sources. The objective of the Aylwin government was to enhance the purchasing power of minimum pensions, to increase the quality of educational and health services and to provide greater assistance in the housing field. The new programs were intended to have a positive effect on the distribution of income. The military government's reforms had privatized or decentralized the administration of many welfare and social-assistance institutions. The Aylwin government did not reverse these privatizations, although it attempted to increase the quality and funding of the institutions that remained in the public sector. It also decided not to recentralize the administration of the public portions of welfare, educational, and social-assistance institutions that had been placed in the hands of local or regional governments. The Aylwin administration was committed to strengthening local and regional governments as part of a broad effort to enhance the decentralization of authority. However, in contrast to the military regime's decentralization projects that organized local and regional governments along lines of authoritarianism and corporatism (see Glossary), new constitutional and legal reforms adopted in 1992 introduced democracy to these levels of government.
Through the combination of many efforts in the social field since the 1930s, Chile has a relatively favorable overall human development index ( HDI--see Glossary), as measured by the United Nations Development Programme (UNDP). The UNDP's Human Development Report, 1993 shows Chile ranking thirty-sixth among the world's 160 countries for this indicator, eighth among all developing countries, and second only to Uruguay among all Spanishspeaking Latin American countries.
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Social Security
Chile was one of the first countries in the Americas to establish state-sponsored social security coverage. In 1898 the government set up a retirement pension system for public employees. In 1924 the government approved a comprehensive set of labor laws and established a national social insurance system for workers. In large part, the authorities were responding to pressure exerted by the growing number of worker organizations and strikes. At the same time, a separate social-insurance system was set up for private white-collar employees, and the one for public employees was reorganized. The pension system for workers was known as the Workers' Security Fund (Caja del Seguro Obrero) and was modeled partly on the system pioneered by Otto von Bismarck, first chancellor of the German Empire (1871-90). The fund (caja) was established administratively as a semiautonomous state agency that received income from employer and worker contributions, as well as from state coffers. The systems for private and public employees provided higher benefits than the workers' caja, and they were financed in the same manner, except that the state acted as the employer for public employees as well. The armed forces had a separate pension system.
The Workers' Security Fund was reorganized in 1952, becoming the Social Insurance Service (Servicio de Seguro Social--SSS). Until its demise under the military government, the SSS served as the primary agency for the state-run social security system. SSS coverage expanded over the years. By the 1960s, in addition to providing old-age pensions to its main beneficiaries, it gave, at their death, pensions to their widows (but not their widowers) and to minor children, if any. It also paid flat monthly sums for each immediate family dependent, income payments for qualified illnesses and disabilities, and several months of unemployment insurance, albeit all at very low levels.
Although the fund originally was meant to meet the needs of miners and urban blue-collar and service workers, including domestics, over the years the number of occupational groups that participated in what became a system of different semiautonomous state funds increased greatly. By the early 1970s, there were thirty-five different pension funds (although three of them served 90 percent of contributors) and more than 150 social security regimes for the various occupational groups. This expansion led to many inequities because the newly incorporated groups demanded and obtained by law special treatments and new benefits that had been denied to original participants, even when these new groups' programs were added to existing funds. There was not even a standard retirement age for all groups. Funding for the various pension programs became extremely complex because the state's contributions were drawn by law from different tax bases. This pattern of growth of social security institutions is typical of countries in which the system is not conceived from the very beginning on a universal basis but rather is established for particular categories of employment. Because coverage continued to be conditioned on the employment history of the main beneficiary, it was never extended to all Chileans, even during its heyday in the early 1970s.
The military government initially hoped to rationalize what had become an unwieldy system, but eventually it changed the whole system completely. It decided not to continue with a basic organizational principle of most social security systems, the payas -you-go system, whereby benefits are paid out of funds collected from those who are still contributing. In addition, the government decided to privatize the organization and management of pension funds and to discontinue the state's own contributions to them. Thus, the military regime enacted the legal basis for the creation of privately run pension-fund companies, stipulating that all new workers entering the labor force had to establish their accounts in the new pension companies. Moreover, the government also created incentives for people in the semiautonomous, state-run system to transfer out of that system by reducing the proportion of each employee's paycheck that would be deducted under the new system to about 15 percent of gross income, instead of the prior 20 percent or 25 percent, and by permitting a transfer of funds based on the number of years individuals had paid into the system.
The new privately run pension funds are based on the notion of individual capitalization accounts. Pension amounts are set by how much there is in the individual account, which is determined by the total that has been contributed plus a proportional share of the pension fund's investments. In any event, by law no pension is allowed to fall below 70 percent of an individual's last monthly salary. If there are insufficient funds to generate the required pension levels in the account, the pension fund company must make up the difference. If the company is unable to meet its obligations, the state, which guarantees the system, has to cover the shortfall.
Employees are allowed to choose the pension-fund company that will handle their account, and those who are self-employed may also elect to establish individual accounts. This choice is intended to stimulate competition among pension-fund companies in order to keep the administrative fees charged to account holders at a reasonable level, and to encourage the companies to invest the money they accumulate so as to generate the highest yields. Employers no longer contribute to employees' pensions under the new system. Disability and survival pensions are paid out of an account funded by a 3.8 percent share of the 15 percent the account holders contribute, leaving the remaining 11.2 percent to build up the pension-generating account. The 3.8 percent share is contracted out by the pension funds to life insurance companies, many of them newly created to meet the enormous increase in demand for their services. Individual account holders are also permitted to make payments in excess of the obligatory minimum. The retirement age is set at sixty-five years for men and sixty years for women, although individuals who accumulate enough funds to obtain a pension equal to 110 percent of the minimum pension may retire earlier.
The new system took effect in 1981, and the great majority of the contributing population opted to change to it. Deciding not to make substantial changes in the social security system, the Aylwin government increased the minimum pension paid by what remained of the state-run social security system by about 30 percent in real terms. By December 1990, there were about 3.7 million people, or 79 percent of the labor force, with accounts in fourteen pension-fund companies, called Pension Fund Administrators (Administradoras de Fondos de Pensiones--AFPs). A large proportion of the uncovered population consisted of self-employed people; only 3 percent of the total accounts came from that group. The funds gathered large sums of money relative to the size of the national economy. By the end of 1992, the pension and life insurance companies had accumulated an estimated US$15 billion. The state regulates and oversees the pension-fund companies through a newly created office that issues strict investment guidelines.
This radical departure from past institutional practices in the pension system is unique, and it drew considerable attention from experts in other Latin America countries also facing looming financial crises in their own social security systems. By generating large amounts of capital in the private sector, the new system energized the previously anemic Chilean capital markets. Because it has operated only for about a decade, however, it has yet to meet the test that will occur when the new pension funds have to pay out in benefits what would correspond to an actuarially normal load. Most of the nation's retirees and older workers have stayed in the state-run social security system, now called the Institute of Pension Fund Normalization (Instituto de Normalización Previsional--INP). By the end of 1990, the private pension companies were only paying out benefits to 2.3 percent of their affiliates (see Economic Results of the Pensions Privatization , ch. 3).
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Health Programs
The state's efforts in the health field began in 1890 with the creation of an agency in charge of public hygiene and sanitation. Despite some subsequent initiatives to prevent and treat work- related accidents, it was not until 1924, with the establishment of the social security system, that the state assumed an active role in providing health care to the population. Between the mid-1920s and the early 1950s, state-run programs for health care were organized around the pension funds. During the 1940s, public health experts argued that the individual pension funds could not organize health delivery systems for their affiliates in a rational way. It was also argued that a system was needed that would provide more comprehensive coverage to the whole population, not only those who had accounts in the pension funds, if the country were to improve its overall health indexes. The eventual acceptance of these arguments by policy makers led in 1952 to the creation of the National Health Service (Servicio Nacional de Salud--SNS).
The SNS continued to provide care to all those who held accounts in the various funds, free of charge to workers and their families in the social security system and for a variable fee to others. In addition, it extended health care to the population at large regardless of ability to pay. Services to those who were poor could be slow and often inadequate if a condition was not life- threatening, but accidents and other emergencies normally were given immediate attention. Moreover, the SNS tried to identify specific health problems and focus on providing care in these areas, such as giving all women primary prenated and postpartum care (and access since the 1960s to contraception), inoculating the population against certain diseases, and working to improve nutrition and hygiene through extension programs and publicity. It is estimated that 65 percent of the national population used the state-run system for curative medicine without paying fees. The SNS coexisted with private medical practices and hospitals, which were preferred by people who could afford them. The military developed its own system of clinics and hospitals. In the late 1960s, the government took the initiative to develop a new program for white- collar employees, permitting users to select their physicians. The program was funded by payroll deductions but required users to pay a fee equal to 50 percent of the cost of their care. The program developed its own primary- and preventive-care clinics and laboratories, although it relied on the hospitals of the SNS for backup care of the more serious cases and for hospitalizations. All but 15 percent of hospitalizations took place in SNS hospitals.
All physicians were obligated to work for the SNS for two years after graduation; they were usually sent to rural areas and small towns where there were chronic shortages of doctors. During the rest of their professional lives, physicians were also obligated to work a certain number of hours a week for the SNS, for which they received relatively small honoraria; in exchange, physicians took advantage of many of the facilities of the state system to treat and test their private patients.
By the early 1970s, the state-run health programs faced a financial crisis. Given that the SNS was intimately tied to the social security system, the military government could not change the latter without altering the former. Thus, in 1980 and 1981 policy makers redesigned the nation's health care institutions.
As a result, the Chilean health system in the early 1990s contained essentially five components. The first is the main successor of the SNS, now called the National System of Health Services (Sistema Nacional de Servicios de Salud--SNSS). In 1988 the SNSS employed about 62,000 professionals, including about 43 percent of the nation's 13,000 physicians, many fewer than had worked for the SNS because physicians no longer had any obligation to serve the public health system. The SNSS's administration was decentralized into twenty-seven regional units, and control over its clinics and primary-care centers was transferred to the nation's 340 municipal governments. However, the national government remained the main source of funding for these various units, and it continued to control their basic design, including staff size and equipment. The SNSS's funding comes from general state revenues and from a contribution of 7 percent of taxable income (up from the original 4 percent in 1981) from the employed population. Access to the SNSS is open to everyone, free of charge in the case of indigents and of those whose income falls below a certain level; a variable percentage of the cost up to 50 percent is paid by those with higher incomes.
The SNSS organizes and implements the broad public health programs in areas such as inoculations and maternal-infant care. It provides periodic preventive medical care to all children under six years of age not enrolled in alternative medical plans. Through this program, which has broad national coverage, low-income mothers can receive supplemental nutritional assistance for their children and for themselves as well if they are pregnant or nursing. As a result, the incidence of moderate to severe childhood malnutrition among those participating in the program has been reduced to negligible levels in Chile, while only about 8 percent of all children suffered mild malnutrition in 1989. The SNSS is the largest health care provider in the country. In the late 1980s, it served 8.2 million people, or about 64 percent of the total population, and its total expenditures on its participants in 1987 equaled about US$22 per person.
The second component of the health system is the National Health Fund (Fondo Nacional de Salud--Fonasa). Fonasa is part of the SNSS, except that those who register in the program may select their own primary-care physicians, as well as specialists. In this sense, Fonasa continues the modus operandi of the program initiated in the late 1960s for white-collar employees, except that anyone can register in it. Fonasa affiliates direct their payroll or self- employment contributions to the fund. Pensioners of the state-run system, the INP, may also choose to participate in Fonasa. The fund reimburses its users a variable portion of the cost of medical attention on presentation of vouchers for services that have been performed (an average 36 percent reimbursement in 1989). In 1987 Fonasa served 2.5 million people, and health expenditures in it amounted to US$79 per affiliate.
The Security Assistance Institutions (Mutuales de Seguridad-- MS) constitute the third element in the health system. These consist of hospitals that deal primarily with treatment of the victims of work-related accidents. These institutions house some of the best trauma and burn centers in the country. The MS are financed out of employer contributions equivalent to about 2.5 percent of their total payrolls and completely cover the medical expenses of employees of the affiliated enterprises who are injured at work. In addition, the MS pay a temporary disability pension. The 1.96 million employees who have access to these institutions work for 52,000 different enterprises. This program is among the better funded, given that its income of US$123 million amounted to about US$62 per covered worker, while the rate of work-related accidents was only about 10.8 percent per year for all incidents, however minor. Safety experts hired by the MS system are also in charge of inspecting workplaces and suggesting improvements to prevent accidents. The MS are composed of numerous institutions administered by boards with employer and employee representatives. In 1987 they ran eight hospitals and nineteen clinics, mainly in Chile's most important urban centers. The product of initiatives taken by some of the country's largest employers in the late 1950s, the MS expanded greatly in the 1980s.
Private insurance companies belonging to the Institute of Public Health and Preventive Medicine (Instituto de Salud y Previsional Prevención--Isapre) constitute the fourth element in the health system. People enroll by asking their employers to direct their health deduction to these companies, and they pay an additional premium depending on the specific insurance policy. Medical services are reimbursed to users at a percentage of cost. In 1987 about 1.5 million people were enrolled in the Isapre, with expenditures of about US$166 per enrollee. Critics of the Isapre insurance companies noted that they did not help mitigate the nation's highly regressive distribution of income because they channeled the deductions of many people with higher incomes out of the SNSS. Moreover, as private carriers, the Isapre companies may deny enrollment to those who are at higher risk (as a result of serious illness or age), and they are prone to drop those who become excessive risks. Consequently, the SNSS must take up the burden of covering the health care of high-risk individuals.
The fifth component of the health care system is private medicine, which includes private hospitals and clinics. Most physicians, dentists, and ophthalmologists maintain a private practice even if they work for the SNSS or other systems. There are also private health insurers who do not form part of the Isapre structure because they do not collect their premiums from payroll deductions. In 1987 they insured 500,000 people drawn from the population with the highest incomes.
In 1992 Chilean health indicators were much closer to those of industrial nations than to those of the developing world (see table 14, Appendix). The four leading causes of death in Chile are circulatory diseases (27 percent), cancer (18 percent), accidents (13 percent), and respiratory illnesses (11 percent). Medical visits average about 3.5 per person per year, or about 2 to 2.5 for the general population and 1 to 1.5 for maternity and child check- ups. The SNSS handles 89.1 percent of all these visits (16.3 percent of them through Fonasa). Fully 98.4 percent of all births occur with professional assistance in hospitals or maternity clinics. In rural areas, where women might need to travel longer distances to give birth, they can spend the last ten to fifteen days of pregnancy in special hostels. Inoculations of infants and children are virtually universal for tuberculosis, diphtheria, pertussis, tetanus, poliomyelitis, and measles.
According to the Pan American Health Organization, the number of cases of acquired immune deficiency syndrome (AIDS) was gradually rising, with 3.8 per million population in 1987, 5.4 per million in 1988, 6.3 per million in 1989, 8.9 per million in 1990, and 11 per million in 1991. As of the end of 1991 in Chile, 196 individuals with AIDS in Chile had died. According to Health Under Secretary Patricio Silva and the National AIDS Commission, of the 990 individuals who were registered as having been infected with the AIDS virus in the country, 630 had become sick and half of them had died by the end of 1992. The report stated that 93 percent of those diagnosed were men and 7 percent were women.
Although the government of President Patricio Aylwin did not make structural changes to the health system, it increased funding for the portions of the system that most benefited the poor, especially primary care services. The salaries of health workers in the public sector were increased. The government also enhanced the decentralization of authority in the public health sector by giving local and regional governments more decision-making power over the distribution and equipment of health-care resources and provisions within the limits of national government funding allotments.
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Housing Policies
The state began its involvement in the construction of low-cost housing in 1906, with a law stipulating that builders of low-cost units would qualify for a complete exemption from all taxes and that their owners would be exempt from real estate taxes for twenty-five years. Subsequent housing programs in Chile have usually consisted of providing subsidies to those who built lowcost houses or to those who bought them. In addition the programs have furnished one-time grants for the necessary down payments to permit people to obtain a loan or qualify for a housing program. Generally, all three features have been in place since the 1950s, although the emphasis on one or another means has shifted with changing governments. Subsidies to buyers have been channeled through below-market interest rates for long-term loans. These generally were made available through pension plans. Between 1955 and 1973, these subsidies mostly benefited the poorest 60 percent of the population, especially the lower-middle 30 percent (for definition of extreme poverty, see Glossary).
Starting in the 1950s, the state also assumed a major role in the construction of low-cost housing. The Housing Corporation (Corporación de la Vivienda--Corvi) was established by the national government in 1953. Between 1960 and 1972, an average of 42,000 houses per year were built in Chile, of which the state built 60 percent and the private sector with state financing built 20 percent; private companies built the remaining 20 percent with private funding.
The military government cut public spending for housing to less than half of its 1970 levels. Supporters of the regime argued that state resources were more efficiently used than before, citing a slight increase, to about 43,000 units, in average annual housing construction. They also argued that attempts were made--with greater success in the late 1980s than at the beginning of the Pinochet regime--to channel state subsidies to the poorest sectors. However, on average the number of new housing units was equal to no more than 56 percent of the total number of new households created between 1974 and 1989; the result was an increase in the nation's housing deficit. A rapid acceleration of construction toward the end of the 1980s, with almost 84,000 units being built in 1989, kept the deficit from becoming even worse.
The military regime reduced the subsidies on housing loans and initiated a monthly readjustment of all such loans according to the rate of inflation as a means of retaining their real value. The government also increased the participation of the private sector in the construction of housing and municipal buildings. It also attempted to allocate houses primarily to households that met certain savings goals, an objective that proved virtually impossible for poor families to meet. As a result, toward the end of military rule the state put more resources into one-time grants to enable families to cover the down payment.
The Aylwin government increased public funds for housing by about 50 percent, although construction remained in the hands of the private sector. It changed the eligibility requirements for public housing programs to favor poorer people unable to save money. The government's intention was to freeze the housing deficit that existed in 1990 by facilitating the building of as many new houses as were needed by the new households that were being formed (see Construction , ch. 3). It also reintroduced utilities subsidies to poor neighborhoods and placed a greater emphasis on communal services for such areas.
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EDUCATION
Enrollments
Despite plans dating back to 1812 to establish widespread primary education, elementary school attendance did not become compulsory until 1920. However, the government did not provide effective means to enforce this policy fully. There was considerable progress, especially in the 1920s and the 1940s, but by mid-century children of primary school age were still not universally enrolled. The principal difficulty lay in the incomplete matriculation and high dropout rate of the nation's poorest children. For this reason, in 1953 the government created the National Council for School Aid and Grants (Junta Nacional de Auxílio Escolar y Becas), which was charged with providing scholarships and with making school breakfasts and lunches available to all children in the tuition-free private and public schools. Through these means, policy makers hoped to encourage the very poorest parents to send their children to school and keep them there. By the early 1970s, school breakfasts were reaching 64 percent of all primary school students, and lunches were being provided to 30 percent. This strategy was apparently successful, and in the mid-1960s, primary education became nearly universal. In 1966 the number of years of primary (and therefore compulsory) education was increased from six to eight; secondary education was thereby reduced to four years. In the mid-1980s, primary school attendance fluctuated between 93 percent and 96 percent of the relevant age-group--a percentage that was less than universal only because some children advanced into secondary school at the age of fourteen instead of the normal age of fifteen.
Beginning in the first half of the nineteenth century, Chile's governments made an effort to create secondary schools and led Latin America in establishing high schools for girls as well as for boys. By 1931 Chile had forty-one state-run high schools for boys and thirty-eight for girls, as well as fifty-nine private high schools for boys and sixty for girls, with a total enrollment of 20,211 boys and 15,014 girls. Reflecting French and German influences on the nation's secondary education, high schools were intended to provide a rigorous preparation for university education.
Chile had other postprimary educational channels that were meant to impart more practical or professional forms of training. Among these were normal schools for the instruction of primary school teachers (the first one for women was created in 1854), agricultural schools (that taught the rudiments of agronomy, animal husbandry, and forestry), industrial schools (with such specialties as mechanics or electricity), commercial schools (with specialties in accounting and secretarial training), so-called technical women's schools (that mainly taught home economics), and schools for painting, sculpture, and music. In 1931 there were 135 of these schools, with a total enrollment of 11,420 males and 11,391 females.
Matriculation of relevant age-groups in all forms of secondary education remained low, as can be surmised from the 1931 figures, and progress was slow. The most rapid advances occurred in the 1960s and early 1970s under the governments of presidents Frei and Allende, which increased spending for education at all levels. By 1970 about 38 percent of all fifteen- to eighteen-year olds in the country had matriculated from one form or another of secondary education; by 1974 that figure increased to 51 percent. Moreover, the curriculum in schools other than high schools had been enhanced significantly, and the graduates of such schools could opt to continue on to university levels. During the rest of the 1970s, under the military government's first six years in power, secondary school enrollments as a percentage of the relevant age-group stagnated. However, in the 1980s enrollments resumed their upward trend. Thus, from a level of 53 percent of the relevant age-group in 1979, secondary school matriculations rose to 75 percent in 1989.
Although the Chilean state traditionally directed about half of its education budget to universities that were either free or charged only nominal matriculation fees, the numbers of students in them had always been tiny as a proportion of the national population between nineteen and twenty-four years of age. As in other areas of education, the Frei and Allende administrations sponsored the largest expansions in postsecondary enrollments. The total numbers of students (including only those in the relevant age-group) almost doubled, from 41,801 in 1965 to 70,588 in 1970, and more than doubled from that number, to 145,663 in 1973. However, these enrollment figures were only equal to about 8 percent and 13 percent of the relevant age-group in 1970 and 1973, respectively. During the rest of the 1970s, the total number of students in universities declined, reaching a low of around 9 percent of the relevant age-group in 1980, including students enrolled in the so-called Professional Institutes (Institutos Profesionales--IPs), which had been separated from the universities by the military government. During the 1980s, the numbers of students in universities and in the IPs increased slowly and stood at about 153,100 in 1989, or 10.3 percent of the relevant agegroup . However, the military government fostered the creation of Technical Training Centers (Centros de Formación Técnica--CFT) as an alternative to postsecondary education. Enrollment in these centers increased rapidly during the 1980s, to about 76,400 students by 1989. In 1991 a total of 245,875 students were in some form of higher or postsecondary education.
At the beginning of the twentieth century, under the influence of German advisers, Chile began to develop preprimary education. Matriculation in these programs also remained very small until the 1960s. In contrast to its attitude toward higher education, the military government took great interest in this form of education, and enrollments increased greatly during the Pinochet years. Statefunded programs for preschoolers, which enrolled about 59,000 children in 1970, had increased their matriculation to about 109,600 by 1974. In 1989 they enrolled 213,200 children, or about 12 percent of the population under five years of age.
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Administration and Reforms
Primary and Secondary Education
Until 1980, authority over all primary and secondary schools was concentrated in the national government's Ministry of Public Education. In addition to allocating funds to schools, the ministry certified the qualifications of all teachers and employed those in the state-run system. It developed all basic course content, even for private schools, and approved all textbooks to be used throughout the country.
Primary school teachers were trained mainly in normal schools, most of which were independent entities, although a few of these institutions were attached to universities. Secondary school teachers generally were graduates of pedagogical schools or university institutes, where students would be trained in the different disciplines they would later teach. Primary and secondary school teachers opting to work in the state-run system were assigned to schools during the first three years of their careers, a procedure that was meant to ensure that all rural and provincial schools had the requisite staffing. The careers of primary and secondary school teachers employed by the state were controlled by a national statute that determined promotions according to a point system and salaries according to a fixed scale. Salary supplements were given to those who taught in areas that were geographically isolated or had severe climates. Teachers also had job tenure beyond a certain probationary period. The Ministry of Public Education sponsored regular winter- and summer-vacation training programs for teachers that were designed to bring them up to date with curriculum changes and with new thinking in their disciplines. Merit increases were given to those who participated in these programs.
The Ministry of Public Education gave subsidies to private schools that did not charge tuition. These subsidies, amounting to about half the per-student cost of public education, were based on calculations of salary and other fixed costs. They were given primarily to schools sponsored by the Roman Catholic Church, as well as by Protestant churches. The teachers of these schools (except those who were in religious orders or in the clergy) were supposed to have the same salary and working conditions as teachers in the public system. Many teachers in the state-run system supplemented their salaries by taking on additional hours in the private schools, which were supposed to follow the national curriculum whether or not they received state subsidies, although they were free to add supplementary courses. All state-run primary and secondary schools were visited regularly by supervisors employed by the Ministry of Public Education, who would observe classes and monitor many final examinations. For purposes of certification, the final examinations of all private secondary schools were conducted by committees of teachers employed by the Ministry of Public Education.
Despite the successes of this education system in terms of expanding enrollments and ensuring a uniform standard of quality across the nation, the military regime's social and economic planners thought it gave the government too much influence over education, stifling parents' and local communities' freedom of choice. They also thought the administration of the system was too bureaucratic and inefficient.
The regime's education authorities decided to decentralize the administration of state schools by turning them over to the municipal governments. Presumably, the schools would thus become more responsive to local demands and needs, although the Ministry of Public Education continued to issue the basic guidelines to be followed in the curricula, to approve textbooks, and, in principle, to require the certification of teachers, although the standards became more flexible. Moreover, the national program of school breakfasts and lunches was transferred, along with the necessary resources, to the municipalities. The authorities committed the necessary funding to maintain universal primary enrollments and, after 1980, to continue to increase the size of secondary enrollments, despite the severe economic downturn of 1982-83.
With the 1980 reforms, all teachers in the state-run system became municipal employees, effectively ending the national system controlling teachers' careers. The result was new inequalities in terms of income and benefits for teachers. Despite increased education subsidies from the central government to poorer municipalities, the richer school systems were able to afford better teacher salaries and educational facilities. In addition, beginning in 1988 municipal authorities were permitted to fire teachers, ending the tenure they had enjoyed in the national career system, a measure that generated widespread manifestations of teacher discontent, including strikes.
The military government fostered the growth of privately run schools by further facilitating the process through which they could obtain subsidies. Moreover, tuition-free public and private schools were put on an equal footing in terms of access to state funding when both began to receive amounts calculated on a similar per-student basis. This amount was prorated on the basis of student attendance records, a measure that put the public systems at a disadvantage because private schools could be selective in their admissions; they could therefore draw their student body from those with more stable family backgrounds and hence could require more regular attendance and better behavior. As a result of these new incentives, enrollments in the publicly funded but privately administered system increased at the expense of the state-owned schools. In 1980, before the beginning of the reform program, the state-run schools had enrolled about 79 percent of primary and secondary students, private but state-subsidized schools enrolled 14 percent, and fully private schools (those that charged tuition) enrolled 7 percent. By the end of 1988, the proportion of students in the state-run schools (by then under municipal control) had dropped to 60 percent, the private but state-subsidized schools' proportion had increased to 33 percent, and the fully private schools continued to enroll 7 percent. Other data suggest that the number of primary and secondary students in private schools increased from 27 percent in 1981 to 56 percent in 1986 (see table 15, Appendix). The authorities also transferred administration of the state's vocational, industrial, and agricultural schools to employer associations, although the public funding of these schools continued.
The Aylwin government doubled funding for education by 1992 and began to address the new challenge the nation confronted to increase the quality of education. As part of this effort, the government examined with renewed interest the issues of teacher morale, training, and careers. It decided to reinvigorate the national continuing education programs for teachers and to reintroduce a National Statute for Teachers. This recreated in part the previous national career system, with a minimum starting salary of about US$250 per month for primary school teachers and promotions and raises based on years of service, merit, additional training, and premiums for teaching in areas that were isolated or had harsh climates. However, because of the Aylwin government's commitment to the decentralization of authority, administration of the system of primary and secondary schools remained to a significant extent in the hands of local governments, with continued efforts to provide increased funding to the poorer municipalities and regions. An initiative by the Aylwin government also committed it to increasing technical training of workers and of youth who had already left the education system. By the end of 1993, about 100,000 people, principally youth, had graduated from such training programs.
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Higher Education
Chilean universities are widely recognized as being among the best in Latin America. Before the education reforms of 1980, Chile had eight universities, two run by the state universities and six private ones, although all received most of their funding from the state. The state universities consisted of the University of Chile (Universidad de Chile), founded in Santiago in 1842 as the successor to the University of San Felipe (Universidad de San Felipe), founded in 1758; and the State Technical University (Universidad Técnica del Estado), founded in Santiago in 1947. The private universities consisted of the Pontifical Catholic University of Chile (Pontífica Universidad Católica de Chile), founded in 1888; the University of Concepción (Universidad de Concepción), founded in 1919; the Catholic University of Valparaíso (Universidad Católica de Valparaíso), founded in 1928; the Federico Santa María Technical University (Universidad Técnica Federico Santa María), founded in Valparaíso in 1931; the Southern University of Chile (Universidad Austral de Chile), founded in Valdivia in 1955; and the University of the North (Universidad del Norte) in Antofagasta, founded in 1956. The nation's largest and most important university, the University of Chile has the authority to oversee the quality of professional training programs in important fields, such as medicine, in the other universities. The University of Chile, the Pontifical Catholic University of Chile, the Federico Santa María Technical University, and, to a lesser extent, the University of Concepción all developed campuses in other cities during the expansion of university enrollments in the late 1960s and early 1970s.
As noted previously, Chilean universities did not charge tuition, aside from minimal matriculation fees that were, following changes introduced in the mid- to late 1960s, higher for students of more affluent parents. In effect, the state used general tax revenues to subsidize a higher-education system whose students were drawn disproportionately from the middle and upper classes. The regressive impact of this policy on the nation's distribution of wealth had been noted repeatedly by economists and sociologists since at least the 1950s.
The military government took a highly critical view of the nation's university system. Persuaded by the notion that state funding for lower education is more efficient in terms of generating the necessary human capital for economic development, the military decided to give priority in resource allocation to preprimary, primary, and secondary schools. In addition to politically motivated purges of faculty members and students, among the first changes the military authorities made at the highereducation level was to charge students substantially higher enrollment fees. Low-income students were supposed to continue to have access to higher education through an expanded system of student loans with generous repayment terms. Yet, as noted earlier, the expansion of higher-education enrollments that had begun in the 1960s ceased after these new policies were put into place.
With the 1980 education reforms, the military government split the two state universities apart, creating separate universities out of what had been their regional provincial campuses. In addition, taking a dim view of increases in the numbers of training programs and degree programs at these universities since the 1960s, the regime limited the degrees that could be obtained in the staterun universities to twelve of the most traditional fields, such as law, medicine, and engineering. Degrees in other areas henceforth had to be obtained from professional institutes; those sections of the state universities consequently were detached, with some attrition, and transformed into freestanding entities. The large School of Pedagogy of the University of Chile, for example, became the Pedagogical Institute.
The Pinochet government also fostered the formation of new private universities and professional institutes, allowing them to set tuition at whatever level they wished and promising to give them direct per-student subsidies, as well as funds for loans to low-income students, on an equal footing with older institutions. The education authorities hoped to stimulate competition among the universities and institutes for the best students by granting the per-student subsidies on the basis of schools' ability to attract the students with the highest scores in a national aptitude test required of all first-year applicants. This competition was thought to be an expeditious way to encourage efforts to increase the quality of higher education. Subsequently, the state subsidies did not become nearly as important as was expected because funding for universities and for student loans declined beginning with the economic crisis of 1982-83. The lower funding levels led to decreases in salaries for faculty and other personnel across the country.
As a result of the policies of breaking up the state universities and stimulating the formation of private institutions, the number of universities increased to forty-one by 1989. Only half of these received state funding that year. In addition, by 1989 there were fifty-six professional training institutes, only two of which received state funding that year. There was also a large increase in the numbers of centers for technical training. In 1989 there were 150 such centers, none of which received state support. Relying entirely on tuition payments, these centers had responded to a demand for postsecondary education that the universities and professional institutes, despite their increased number, had been unable to meet. However, the quality of the training these centers provided was questionable. Most of them had two-year training programs with few facilities other than classrooms.
The changes introduced by the military government increased the number and variety of higher education institutions, but the reforms also led to much greater disparities among them, as well as to a likely decline in the overall quality of the nation's higher education system. There was an increase in part-time faculty teaching, a decline in full-time faculty salaries, and a much greater dispersion of resources needed by important facilities, such as laboratories and libraries. These changes also led to the creation of a considerable number of research institutes with no student training programs that were dependent on grants or research contracts from international or national sources for their funding. These institutes developed most prominently in the social sciences and became an important alternative source of employment for specialists who had been or would have been engaged by universities. Consequently, in contrast to the period before 1973, most of the innovative thinking and writing in these areas was no longer being done at universities, and new generations of students were having less contact with the best specialists in these fields.
The Aylwin government did not introduce fundamental changes in the higher education system handed down to it by the military regime. It continued to fund higher education in part by allocating per-student subsidies to institutions able to attract students who scored highest on the multiple-choice examination modeled on the Scholastic Aptitude Test used in the United States. However, the Alywin government was critical of what it considered an excessive disaggregation and dispersion of higher education institutions. Consequently, it concentrated more of its direct subsidies on the traditional universities and their offshoots and attempted to enhance their quality by making more funds available for basic and applied research. The government also increased funding for lowincome student loans and scholarships, for studies at any institution.
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RELIGION AND CHURCHES
Religious Affiliations and Church Organization
Roman Catholicism is an integral part of Chile's history and culture, and the great majority of Chileans consider themselves Roman Catholic. However, their numbers have been declining since 1970, while the Protestant population has been increasing. The 1970 census showed that about 90 percent of the population was nominally Roman Catholic, and a little over 6 percent was Protestant. The 1982 census did not include questions on religion. The 1992 census showed that 76.9 percent of the population fourteen years of age and older declared itself Catholic, while 13.1 percent declared itself either "Evangelical" (see Glossary) or "Protestant" (see table 16, Appendix). This latter percentage reflected a moderate but steady increase with each census since 1920, when only 1.4 percent of the population was counted as Protestant. About 90 percent of Protestants belong to Pentecostal (Evangelical) denominations.
The more than doubling of the proportion of Protestants in the total population over the 1970-92 period means that a large number of them are converts. Surveys taken in December 1990 and October 1991 by the Center for Public Studies (Centro de Estudios Públicos- -CEP) in collaboration with Adimark, a polling agency, showed that about 95 percent of Roman Catholic respondents have been Catholics since childhood, whereas only about 38 percent of Protestants said they have been Protestants since their early years. Moreover, fully 26 percent of Protestants noted that they had converted sometime in the previous ten years.
According to the 1992 census, there was also a significant minority of about 7 percent of Chileans who declared themselves indifferent to religion or atheists. This group increased from a little over 3 percent in 1970. Other religious groups, mainly Jewish, Muslim, and Christian Orthodox accounted for 4.2 percent of the population fourteen years of age or older.
The CEP-Adimark surveys also included questions on religious practice. According to the surveys, about a quarter of all adult Chileans attend church services at least once a week, a proportion indicative of considerable secularization. A much greater proportion of Protestants (about 46 percent) than of those who said they are Roman Catholics (about 18 percent) are regular churchgoers. Thus, the authors of the CEP-Adimark report note that there is roughly one Protestant for every two Catholics among people attending church at least once a week in Chile. The proportion of nominal Catholics attending mass weekly seems to have increased slightly since the late 1970s; prior studies had shown an attendance rate between 10 and 15 percent.
The distribution of practicing Catholics and Protestants varies dramatically on the basis of socioeconomic status. In 1990-91 about half the practicing Protestant population (52.1 percent) was composed of individuals from poorer groups, while a tiny minority (2.3 percent) had high socioeconomic status. Among practicing Catholics, the proportion with high status was significant at 15 percent, whereas the poorest segment constituted about a fifth (21.8 percent) of all those who practiced. These differences are so salient that among the poor Chilean urban population, for every practicing Roman Catholic there is a practicing Protestant. The growth of Protestantism has therefore mainly been at the expense of the Catholicity of the lower socioeconomic groups, among whom Catholicism has long been weakest. Surveys taken between the late 1950s and early 1970s showed that only between 4 and 8 percent of working-class people who were nominally Catholic attended mass weekly. The 1991 survey showed that 93.4 percent of high-income respondents indicated that they are nominally Catholic; the proportions declined to 75.2 percent of middle-income people and to 69 percent of those with lower incomes. Among the latter, 22 percent consider themselves nominally Protestant. The practicing Protestants also tend to work in greater proportions in the personal service areas of the economy and to be less educated than Catholics. This is consistent with the generally lower economic status of the Protestant population.
Slightly more than half of all Chileans who declared a religious affiliation are women. However, among those who practice, the proportion of women is significantly higher. This is particularly the case for Protestants. Among urban Protestant respondents, about 70 percent of those who attend church services at least once a week are women. Among Roman Catholics, the proportion of practicing women is about 63 percent.
The Roman Catholic Church is divided into twenty-four dioceses and one armed forces chaplaincy. These are led by five archbishops and thirty bishops, some of whom serve as auxiliaries in the larger dioceses. There are also two retired cardinals. The church has long suffered from a shortage of priests. Since the 1960s, they have numbered between 2,300 and 2,500, about half of them foreign born. By 1990 there were 3,000 Catholics per priest. With about 760 parishes throughout the country, the church is unable to extend its presence to the entire Catholic population. This situation is illustrated by a comparison of the number of places of worship for Santiago's Catholic and Protestant populations: 470 Roman Catholic parishes and chapels versus about 1,150 churches and other places of Protestant (mainly Pentecostal) worship.
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Religion in Historical Perspective
Independence from Spain disrupted the church-state relationship. The clergy was divided over the question of breaking the ties to Spain, although the most prominent church officials were generally royalists. As a result, the new independent governments and the leaders of the church viewed each other with distrust. The development of what would later be called the "black legend" (a highly unfavorable view of the colonial administration, of which the church was an integral part), coupled with an admiration for the progress of Protestant lands, fueled this distrust. Despite their misgivings about church attitudes toward independence, the new rulers insisted that they were entitled to exercise the patronato real (see Glossary), the agreement between the Spanish crown and the pope, thereby assuming this important royal power as well. This prerogative was enshrined in the 1833 constitution, which made Roman Catholicism the established church of the new Chilean state. Consequently, the authorities followed the prior practice of sending church appointments to the Vatican for its formal approval and to oversee the governance of the church. For their part, church officials expected that the government would continue to ban all other religions from the country. Moreover, they hoped to retain full authority over education, to keep all civil law subordinate to canonical law, and to continue to function as the state's surrogate civil registry, as well as to control all cemeteries. In addition, they increasingly asserted the independence of the church from the interference of state authorities.
This was a church-state relationship fraught with potential for conflict, and as the nineteenth century progressed many conflicts did indeed emerge. By the late 1850s, a fundamental fault line in Chilean politics and society had developed between unconditional defenders of church prerogatives, who became the Conservatives, and those who preferred to limit the church's role in national life, who became the Liberals or, if they took more strongly anticlerical positions, the Radicals. Although most Liberals and even most Radicals were also Roman Catholics, they were in favor of allowing the existence of other churches and of limiting canonical law to church-related matters, while establishing the supremacy of the state's laws and courts over the nation as a whole, even over priests and other church officials. They also advocated the creation of non-Catholic schools and civil cemeteries, and they pressed for the establishment of a state-managed civil registry that would be entitled to issue the only legally valid birth, marriage, and death certificates. By the 1880s, a decade that saw a break in relations between the Chilean government and the Vatican, all of these points of the more secular and anticlerical agendas had been established. However, the Roman Catholic Church continued to be the established church, dependent on the state for its finances and appointments. This led periodically to new political tensions.
Emerging in the 1820s, the first source of state-church conflicts was the issue of the right of non-Catholics to practice their religion. The government favored allowing them to do so in private homes or other nonpublic places, while the Roman Catholic Church opposed this notion. The issue was a question of considerable significance for more than just civil liberties.
Independence from Spain had permitted the legal establishment of direct commercial links between Chile and other countries throughout the world. These links led to the creation, especially in Valparaíso, of wholesale commercial enterprises that brought British and other foreign nationals who were non-Catholic to the country, and they demanded the right to practice their religion. Denying them religious freedom not only created diplomatic problems with the dominant economic powers of the time but also had the potential to undermine the operations of the export-import concerns that handled much of the emerging country's foreign trade.
Beginning in the 1840s, the Chilean government sponsored the immigration of German settlers to the southern lake district. Most of them, contrary to the government's wishes, came from Protestant parts of Germany. As a result, the first Protestant services in Chile, mainly Anglican and Lutheran, began in immigrant communities. Initially, they were merely tolerated by the authorities, but in 1865 a new law interpreting the religious clause of the constitution that declared Roman Catholicism as the official state religion permitted private practice by non-Catholic denominations.
In the last quarter of the nineteenth century, Protestant missionaries of various denominations, beginning with the Presbyterians, came to Chile. Although they continued to serve mainly the immigrant communities, they also made an effort to obtain Chilean converts. The Anglicans set up missions among the Mapuche, and these are still operating. American Methodists founded schools--the well-known Santiago College, which was established in 1880, among them--that were open to middle- and upper-class Chilean children, especially girls. Parents seeking alternatives to Catholic education opted for Protestant missionary schools. By the turn of the century, a small community of local converts to Protestant denominations began to form. In 1909 a segment of the new Methodist group that had adopted charismatic rituals broke off from the main missionary body. This breakaway group became the Pentecostal Methodist Church, which itself split in 1934 when the Evangelical Pentecostal Church was formed. These two denominations remained the principal Pentecostal groups in Chile, although there were many different subdenominations.
Judaism, virtually unknown in nineteenth-century Chile, originated with the Central European Jews who arrived in the country fleeing persecution mainly between World War I and World War II. Both Jews and Protestants, as religious minorities in a predominantly Catholic country, were strongly in favor of religious freedoms and of full separation between church and state. It was therefore natural for them to identify more closely with the more secular and even anticlerical segments of Chilean society and politics; and it was natural for the latter to consider them a part of their constituency. Yet, given their religious beliefs, strict moral upbringing, and, among Chilean Protestants, generally, abstention from alcohol, these segments of the non-Catholic Chilean society had little in common with the broader anticlerical groups. In fact, on many moral issues, non-Catholics' opinions were much closer to those of practicing Roman Catholics. For this reason, although practicing Protestants and Jews tended to vote for the more secular parties in greater proportions than other groups, they generally did not have a particularly strong political identity or play important leadership roles, exceptions aside, in political or social life.
In 1925 President Arturo Alessandri Palma (1920-24, 1925, 1932- 38) pressed for and obtained a separation of church and state. This resolved most sources of church-state friction, but more than a century of conflicts had already created subcultures in Chilean society that continued to leave their mark on twentieth-century educational institutions, intellectual life, social organizations, and politics. The segments most distant from and even opposed to the Catholic Church were receptive to positivism (see Glossary) and, especially after the 1930s, to Marxism. In this sense, the nineteenth-century fault line contributed indirectly to the eventual appeal among educated Chileans of the nation's communist and socialist parties.
During the interwar years, partly in response to the challenges of secular intellectuals and political leaders and partly as a result of new trends in international Catholicism, the Roman Catholic Church in Chile slowly began to espouse socially and politically more progressive positions. This more progressive Catholicism initially had its main impact among university students, who, in the mid-1930s under the leadership of Eduardo Frei, created a new party that in 1957 fused with other groups to become the Christian Democratic Party (Partido Demócrata Cristiano- -PDC). This development split the subculture that was closer to the Catholic Church into politically conservative and centrist segments. By the early 1960s, a solid majority of the church hierarchy favored the Christian Democrats, and there was a significant shift of voter support from the Conservative Party (Partido Conservador--PC) to the PDC. Following the new thinking in church circles, the hierarchy openly embraced positions favoring land reform, much to the dismay of the still-important minority of Catholics on the right.
The dominant consensus within Chilean Catholicism was much in tune with the resolutions and spirit of Vatican Council II (1962- 65) in theological, ritual, and pastoral matters. Within the Latin American context, the Chilean Roman Catholic Church quickly became noted as a post-Vatican Conciliar church of moderately progressive positions on political and socioeconomic issues, and its representatives played an important part in the reform-minded Medellín (1968) and Puebla (1979) conferences of Latin American bishops. In the late 1960s and 1970s, the church fostered the establishment of Christian Base Communities (Comunidades Eclesiales de Base-- CEBs; see Glossary) in poor urban neighborhoods. However, only a minority in the Chilean church subscribed to what became known as liberation theology (see Glossary).
In the wake of the military coup of September 1973, the church established, initially in association with some leaders of the nation's Protestant and Jewish communities, an office for the defense of human rights. Later reorganized under exclusive sponsorship of the archdiocese of Santiago as the Vicariate of Solidarity (Vicaría de la Solidaridad), this organization continued to receive funds from international Protestant sources and valiantly collected information on human rights violations during the nearly seventeen years of military rule. Its lawyers presented literally thousands of writs of habeas corpus, in all but a few cases to no avail, and provided for the legal defense of prisoners. The church also supported popular and labor organizations and called repeatedly for the restoration of democracy and for national reconciliation.
As the papacy of John Paul II (1978- ) progressed, the Chilean Catholic Church, like other national congregations around the world, became somewhat more conservative in outlook. In the early 1990s, the episcopal conference was about evenly split between those formed in the spirit of Vatican Council II and those espousing more conservative positions. However, this shifting balance did not affect the church's advocacy of human rights and democracy during the military regime (see The Church , ch. 4).
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Forms of Popular Religiosity
Anthropologists of religion would be hard-pressed to find expressions of indigenous beliefs in the "popular" sectors (see Glossary) of Chile. The principal exception to this is in the north, where various religious festivals honoring the Virgin Mary show bold traces of highland Andean indigenous beliefs. The most noted of these is "La Tirana," held each July in Iquique and the nearby village of La Tirana. In the rest of the country, Christian and indigenous religious syncretism has been largely confined to native American communities, where faiths in various animal and bird spirits coexist with beliefs of Christian origin.
Popular religious beliefs focus to a large extent on the notion that there is a struggle between good and evil, the latter seen as a force personified by the devil. This perspective is much in line with Mapuche beliefs. Illnesses are often seen, like sin, as tied in some way to the devil's work. Catholic priests in poor parishes usually have had the experience of being called by their least educated parishioners to perform exorcisms, particularly of demons thought to be afflicting sick children, and many Pentecostal services focus on ridding body and soul of satanic influences and on faith healing. A belief in heaven and in the eternal horrors of hell is a fundamental ingredient of the popular religious imagery, with earthly life said to be a brief trial determining the soul's final destination. Much of the message of Pentecostal sermons revolves around these concepts, focusing on the weakness of the flesh and on the necessity of leading a life of constant preparation for eternal deliverance. In this respect, there is a puritan streak to the Pentecostal message that is reinforced through a liberal use of individual testimonies of repentance and conversion from members, of the congregation. Among Catholics, this element of popular religiosity is tied intimately to a belief in the intercession of saints and, most important, of the Virgin Mary. Intercession may be invoked on behalf of deceased family members who are remembered in prayers.
The afterworld is heavily populated in popular religious imagery by errant souls atoning for their sins and seeking their final rest. Particularly in rural areas, it is common along roadsides to see niches carved into the sides of hills or shaped from clay the contain crosses, occasionally photographs, and candles. The niches are in the proximity of places where people met sudden, violent deaths, primarily from traffic accidents, without the benefit of last rites. The candles are lit mainly to plead for their souls but also in some cases to ask the deceased to intercede for those who light them. It is customary among the Chilean poor to believe that infants who die become little angels. Pilgrimages to Catholic churches that house special images of the Virgin or of saints and multitudinous processions in which these images are displayed are also part of the popular religious landscape. The faithful frequently offer penances in the hope of obtaining special favors.
A central objective of Pentecostal services is to experience a manifestation of the Holy Spirit. The leader of the service tries to cleanse the congregation of devilish influences and to prepare the way for this manifestation. Between his or her invocations stressing the necessity and possibility of redemption from sin and anointments of the sick, the congregation joins in rhythmic but often lamentational singing, sometimes to the accompaniment of guitars and tambourines, and often supplemented by the clapping of hands. While singing, some of the women who attend will frequently begin to dance, swaying back and forth, and even to "speak in tongues." Sometimes the dancing will surround certain individuals who are chosen because they need special attention for some reason. Another common practice is for members of the congregation to pray individually in a loud voice.
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ATTITUDES TOWARD FAMILY AND GENDER
Divorce, Abortion, and Contraception
Chile is one of the last countries in the world that has not legalized divorce. A law permits marital separation under certain conditions, but it does not terminate the conjugal bond. Despite the Catholic hierarchy's opposition to the legalization of divorce, at least half of all Chileans apparently favor enacting such a law (see table 17, Appendix). In the 1990 CEP-Adimark survey, 55.6 percent of those interviewed were in favor of legal divorce.
The differences of opinion on divorce among various categories of the population are noteworthy. Support for its legalization is slightly stronger among men than among women. It is much stronger among young adults than among the middle-aged, while only a minority of older people support it. High-income respondents constitute the group most in favor, whereas lower-income respondents largely disapprove (70.1 percent to 15.5 percent); a small majority of those with middle and lower incomes support legalization. A slight majority of self-identified Catholics are in favor, but among practicing Catholics a majority reject the notion. A small majority of those who said they are Protestant reject legalization. This rejection is stronger among weekly churchgoers. Curiously, Protestants (mainly Pentecostals, who tend to have very traditional opinions) are closer to the positions of the Catholic hierarchy than are Catholic respondents.
Although Chile does not have a divorce law, a surrogate and well-institutionalized means of severing conjugal bonds is the annulment of civil marriages. Civil marriage ceremonies are the only legally valid ones, and couples who have church weddings must also marry at the civil registry. The annulment is usually done with the assistance of attorneys who argue that there has been some procedural error in the civil marriage process. It often involves obtaining witnesses who would attest to facts, whether true or false, that vitiate the original proceedings, such as asserting that the couple does not reside where they said they did when they were married. This is enough to make a case for invalidating the action of the civil registrar who performs the ceremony and draws up the papers. To a large extent, Chile's lack of a proper divorce law can be attributed to the ability of separated couples to annul their marriage following these procedures. As a result, the political pressure to enact a divorce law is diffused. In 1991, the latest year for which there were published figures, there were 5,852 marriage annulments (and 91,732 marriages) in the country; the number of annulments showed a steady increase over seven years from a level of 3,987 in 1984. The actual number of separations of married couples is much higher, especially among those who lack the means to hire the necessary annulment lawyers. New bonds are often established outside of wedlock.
Whereas the Chilean public seems somewhat favorably inclined toward the legalization of divorce, it shows considerable resistance to legal abortion. Although survey results vary, according to the way questions on abortion are posed, the notion of permitting abortion on demand has only a small proportion of supporters. It varied from 5 percent in the CEP-Adimark December 1990 survey to a high of 22.4 percent in the July 1991 survey conducted by the Center for Contemporary Reality Studies (Centro de Estudios de la Realidad Contemporánea--CERC). However, a relatively large proportion of survey respondents favored abortion under certain circumstances. The CERC survey of July 1991 showed that 76 percent considered abortion permissible when "the mother's life is in danger or when the baby will be born with malformations"; similarly, 53.4 percent thought that abortion should be permitted in cases of rape. While nearly half of all respondents rejected abortion in all circumstances, 44.7 percent would permit it with qualifications (see table 18, Appendix).
There is a considerable degree of consensus among the various categories of respondents to a December 1991 CEP-Adimark survey, except for individuals of high socioeconomic status and practicing Catholics or Protestants. As on the issue of divorce, the first group had the most liberal views of all, with only 14 percent agreeing with the notion that abortion should not be permitted and 78 percent accepting it in qualified circumstances. Practicing Catholics rejected abortion in a somewhat greater proportion than the average, and they accepted it in qualified circumstances to a slightly lesser extent. Practicing Protestants (mainly Pentecostals) had the most restrictive views of all: more than 80 percent rejected abortion outright, 17.6 accepted it in qualified circumstances, and a tiny fraction agreed that the matter should be left up to the individual woman. Although illegal, abortions are commonly performed in Chile. Social science researchers have estimated that about a third of all Chilean women have one or more induced abortions during their childbearing years.
Birth control methods of all types find broad acceptance among the population. This is true even of practicing Catholics, 81.3 percent of whom found their use acceptable. National health programs have facilitated access to birth control since the 1960s, and the use of contraceptives is widespread. However, these programs provide easy access to birth control only to women who have already had at least one child because the programs are mainly organized to provide prenatal and postpartum primary care. Birth control is therefore more difficult to obtain for childless women, especially younger and poorer women. Thus first pregnancies out of wedlock as well as first marriages of pregnant brides are frequent. This differential in contraceptive practices is largely responsible for the fact that the proportion of births out of wedlock over the total number of births increased with the overall decline in the birth rate (see table 19, Appendix). The number of births in wedlock has fallen almost by half since the initiation of the contraception programs, while the births out of wedlock have remained fairly constant. This means that currently a third of all births are out of wedlock, up from 17.5 percent in 1965.
Premarital sex among couples in love with each other is also broadly accepted, except among practicing Protestants, only 40 percent of whom approved, and among those age fifty-five and older, only 39 percent of whom approved. Sixty-three percent of practicing Catholics accepted this practice, despite the strong disapproval of the church hierarchy. On this issue, practicing Protestants again are closer to the Catholic hierarchy's teachings than are lay Catholics themselves. The acceptance of premarital relations compounds the problems caused by the relatively more difficult access to birth control for childless women.
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Family Structure and Attitudes Toward Gender Roles
Extended-family life has occupied an important place in Chilean society. Although couples are expected to set up their own households, they remain in close contact with the members of their larger families. Children generally get to know their cousins well, as much adult leisure time, generally on weekends and holidays, is spent in the company of relatives. It is also common to find children living for extended periods of time for educational or other reasons in households headed by relatives, sometimes even cousins of their parents. These extended-family ties provide a network of support in times of nuclear family crises. It is also common for close friendships among adults to lead to links that are family-like. For example, children often refer to their parents' friends as "uncle" or "aunt."
Traditional definitions of gender roles have broken down considerably as women have won access to more education and have entered the labor force in larger numbers. By 1990 about half the students in the nation's primary and secondary schools were female; the proportion of women was lower, about 44 percent of the total enrollment in all forms of higher education. The University of Chile graduated Latin America's first female lawyers and physicians in the 1880s. However, women made faster progress in traditionally female professions than in other professions. Thus, by 1910 there were 3,980 women teachers, but there were only seven physicians, ten dentists, and three lawyers. By the 1930s, female enrollments reached significant numbers in these fields. The University of Chile in 1932 had 124 female students enrolled in law (17 percent of the total), ninety-six in medicine (9.5 percent), and 108 in dentistry (38 percent), although 55 percent of all women students at the university were enrolled in education.
Attitudes regarding the proper roles of men and women in society seemingly no longer follow a fully traditional pattern. A 1984 survey conducted in Santiago by the Diagnos polling firm found widespread support among men (more than 80 percent) and women (more than 90 percent) of high, medium, and low socioeconomic status for the notion that women benefit as individuals if they work outside the home. When asked if they agreed or disagreed with the notion that "it is better for women to concentrate on the home and men on their jobs," 43 percent of the national sample in the CERC July 1991 survey agreed, even though the term "concentrate" does not imply a denial of the right of women to work outside the home. There were some differences between the genders over this question, with 49 percent of men and 38 percent of women in agreement. The percentage in favor of this notion increased with age. Only 30 percent of those under age twenty-five agreed, while 61 percent of those over age sixty-one did so.
Men and women in the same CERC study were considerably divided over whether "women should obey their husbands." This is a sentence included in family law that is supposed to be read (although it is frequently omitted) to Chileans when they take their marriage vows in the civil registry's ceremony; 55 percent of men agreed, while only 40 percent of women did so. Again, men held the more traditional views, but considering the nature of the proposition and its long-established status in civil law, the fact that only slightly more than half of them agreed can be considered a sign of changing times.
Surveys of working-class respondents can usually be counted on to capture the more traditional views of urban society toward male and female roles because such attitudes are usually associated with lower levels of educational attainment. But working-class Chileans are in general not as traditionally minded as could be expected about the issue of women working outside the home. In a 1988 survey of workers, 70 percent of the men and 85 percent of the women agreed with the notion that "even if there is no economic necessity, it is still convenient for women to work." The notion that "men should participate more actively in housework so that women are able to work" was accepted by 70 percent of men and 92 percent of women. Forty-five percent of men believed that "women who work gravely neglect their home obligations," while 21 percent of women did so. However, male support for the notion of women working outside the home varied depending on the way the question was phrased. When interviewers presented the ide that "if men were to make more money, then women should return to the home," 63 percent of men agreed, while only 33 percent of women did.
Nonetheless, popular beliefs hold very strongly to the notion that women reach full self-realization primarily through motherhood. This generates strong pressures on women to have children, although most take the necessary measures to have fewer than did their mothers and especially their grandmothers. Employed working-class women usually are able to find preschools and day care for their small children, as these programs are broadly established throughout the country. The extended family also provides a means of obtaining child care.
Middle-class to upper-class households usually hire female domestic servants to do housework and take care of children. This practice facilitates the work life of the women of such households. Women can frequently be found in the professions even outside such traditionally female-dominated areas as primary and secondary education, nursing, and social work. For example, among the nation's 14,334 physicians in 1990, there were 3,811 women, or 27 percent of the total. This percentage has been increasing in recent years. Among the 7,616 physicians less than thirty-five years of age, there were 2,778 women, or 37 percent of the total. In 1991 about 48 percent of the nation's 748 judges were women; although there were none on the Supreme Court, 24.2 percent of the appellate court judges were women. A slight majority of the roughly 4,200 journalists in the country were women.
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WHITHER CHILE?
In the early 1990s, most social, economic, and political leaders are being driven by a search for consensus on pragmatic solutions to national problems. The strength of these attitudes stems in large measure from an attempt to recover from what most Chileans view, in one sense or another, as national failures. The country experienced slow and erratic growth, hyperinflation, the breakdown of its democracy, human rights abuses, the exile of many people, and a period of harsh economic adjustment under military government. Chileans hope to put these events behind them, and to do so with a new sense of unity and purpose, avoiding costly mistakes and unnecessary conflicts.
The nation's transition to democracy was a smooth one, thanks in large part to the new national mood favoring negotiations and consensus. But many challenges lay ahead. The objective of continuing rapid development while increasing equity and enhancing democratic governance is indeed a tall order. However, buoyed by high levels of growth and historically low levels of unemployment, a majority of Chileans view the future optimistically.
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Since the early 1970s, Chilean social scientists have been active in studying virtually all aspects of their society. The most comprehensive, useful, and authoritative source on Chilean physical and human geography is Geografía general y regional de Chile by Ximena Toledo O. and Eduardo Zapater A. The book is best complemented by the latest edition of the Compendio estadístico of the National Statistics Institute, which provides a summary of the most commonly consulted statistics. The political characteristics of the various regions of the country are treated in César N. Caviedes's The Politics of Chile.
Consistent with the relative unimportance of ethnic divisions in the Chilean population, there are no significant studies of the nation's ethnic groups, except for the Mapuche. The best source for an examination of their culture and social organization is Louis C. Faron's The Mapuche Indians of Chile. A wealth of recent information on the Mapuche can be found in Censo de reducciones indígenas seleccionadas: Análisis sociodemográfico, edited by Jorge Martínez.
The best single work on the current situation in the countryside is Sergio Gómez and Jorge Echenique's La agricultura chilena. An examination of the countryside at the height of agrarian reform is Solon Lovett Barraclough and José Antonio Fernández's Diagnóstico de la reforma agraria chilena. A useful collection of articles covering the period from the 1950s to the early 1990s is contained in Development and Social Change in the Chilean Countryside, edited by Cristóbal Kay and Patricio Silva.
There is a growing body of literature on Chilean social policies, welfare institutions, and social-assistance programs. The best works are José Pablo Arellano's Políticas sociales y desarrollo, which provides an excellent overview of the welfare institutions since their inception; Pilar Vergara's Políticas hacia la extrema pobreza en Chile, 1973-1988, which examines the military government's programs to assist the poorest segments of the population; Tarsicio Castañeda's Para combatir la pobreza, which covers some of the same ground as Vergara but from the perspective of a supporter of the military government; Hernán Cheyre Valenzuela's La previsión en Chile, ayer y hoy and Augusto Iglesias P. and Rodrigo Acuña R.'s Sistema de pensiones en América Latina, both of which examine the new private pension system and its social and economic effects; and Jorge Jiménez de la Jara's Chile: Sistema de salud en transición a la democracia, which is comprehensive in its analysis of the various components of the health system.
Guillermo Campero's Los gremios empresariales en el período 1970-1983 is the most comprehensive examination of entrepreneurial associations. A more recent analysis of entrepreneurs is Cecilia Montero's "La evolución del empresariado chileno" Alan Angell's Politics and the Labour Movement in Chile remains the best source for examining the composition of the twentieth-century labor movement prior to the military government. The labor movement during the 1980s is well treated in Patricio P. Frías's El movimiento sindical chileno en la lucha por la democracia, 1973-1988.
The best single work on the Roman Catholic Church is Brian H. Smith's The Church and Politics in Chile. The Catholic Church during the military regime is the object of Enrique Correa and José Antonio Veira-Gallo's Iglesia y dictadura. A brief but excellent examination of the growth of Protestantism, including a comparison of the social and political attitudes of practicing Protestants and Catholics, is Arturo Fontaine Talavera and Herald Beyer's "Retrato del movimiento evangélico a la luz de las encuestas de opinión pública." The development of religious life in Chile and the relations between the military regime and all religious groups, especially Protestants, is the subject of Humberto Lagos Schuffeneger's Crisis de la esperanza.
The most comprehensive single analysis of women in Chilean society continues to be Felícitas Klimpel's La mujer chilena. Paz Covarrubias and Rolando Franco's Chile: Mujer y sociedad covers virtually all aspects of women's involvement in society with its thirty-two separate articles. Teresa Valdés's Venid benditas de mi padre provides a useful in-depth look at the life of twenty-six popular-sector women. (For further information and complete citations, see Bibliography.)
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Chapter 3. The Economy
CHILE'S ECONOMY ENJOYED a remarkable boom in the early 1990s, the result of a comprehensive transformation that began in 1974 with the adoption of free-market economic policies. Between the 1930s and the early 1970s, the Chilean economy was one of the most stateoriented economies in Latin America. For decades, it was dominated by the philosophy of import-substitution industrialization (see Glossary). Heavily subsidized by the government, a largely inefficient industrial sector had developed. The sector's main characteristics were a low rate of job creation, a virtual absence of nontraditional exports, and a general lack of growth and development. In the early 1970s, the ruling socialist-communist Popular Unity (Unidad Popular--UP) coalition of President Salvador Allende Gossens (1970-73) attempted to implement a socialist economic system. The Allende experiment came to an end with the military coup of September 11, 1973. From that point on, Chile's economic policies took a radical turn, as the military government undertook, first timidly and later more confidently, deep reforms aimed at creating a market economy.
In the early 1990s, politicians and analysts from around the world looked to the Chilean economy for lessons on how to open up international trade, create dynamic capital markets, and undertake an aggressive privatization process. In early 1994, Chile had the strongest economic structure in Latin America and, in large part because of the military government's reforms, was emerging as a modern economy enjoying vigorous growth. Moreover, there seemed to be a consensus among politicians of widely varying beliefs that the existing economic model should be maintained in the future.
Chile's income per capita, approximately US$2,800, placed the nation squarely in the middle of what the World Bank (see Glossary) called "middle-income economies." Of the Latin American nations, Brazil, Uruguay, Venezuela, Mexico, and Argentina in 1990 each had a higher gross national product ( GNP--see Glossary) per capita than Chile; the rest had a lower level. In the 1991-93 period, the rate at which Chile's gross domestic product ( GDP--see Glossary) grew exceeded 6.5 percent per year, making Chile's GDP during these years by far the fastest growing in Latin America. In 1992 GDP grew at a record 10.3 percent pace, year-end unemployment was down to 4.5 percent, real wages were up 5 percent, inflation was down to 12.7 percent, and the public-sector surplus was equivalent to 3 percent of GDP. When a longer period is considered, Chile still comes up ahead of the rest of the Latin American nations. For instance, according to the United Nations Economic Commission for Latin America (Comisión Económica para América Latina-- CEPAL or ECLA; see Glossary), Chile's GDP per capita increased by 32.2 percent between 1981 and 1993; Colombia was a distant second with an accumulated rate of growth during the period of 23.6 percent.
The success Chile enjoyed by the 1990s resulted largely from the boom in agricultural exports. In 1970 Chile exported US$33 million in agricultural, forestry, and fishing products; by 1991 the total had jumped to US$1.2 billion. This figure excluded those manufactured goods based on products of the agricultural, livestock, and forestry sectors. Much of the increased agricultural production in the country was the result of rapidly improving yields and higher productivity, spurred by an export-oriented policy.
There was little doubt that an exchange-rate policy aimed at encouraging exports lay behind the strong performance of the Chilean economy in the 1986-91 period. First, the liberalization of international trade substantially lowered the costs of imported agricultural inputs and capital goods, enabling the sector to become more competitive. In fact, the liberalization of international trade put an end to a long history of discrimination against agriculture. Tariffs and other forms of import restrictions throughout the 1950s and 1960s gave a relative advantage to those industries that produced importable goods, making them domestically competitive at production costs above international prices. The same policies, because they permitted an overvalued exchange rate, punished those economic activities, like agriculture, that could produce exportable goods. While those goods could be sold at international prices, the foreign-exchange earnings would be converted into domestic currency at an unfavorable exchange rate. Second, the exchange-rate policy, pursued aggressively since 1985, had provided incentives for the expansion of exports.
Third, an institutional framework that secured property rights to land and water, along with reformed labor laws, had increased the openness of factor markets (see Glossary) and established clear signals for the allocation of resources. Potential profits in new business initiatives had by then become very much tied to international prices of goods and domestic costs of resources. The likelihood of government intervention in property rights allocation, prohibitions, special permits, and so forth had been significantly reduced. Related reforms in the transportation sector, particularly in air and marine transport, had further increased access to international trade.
A fourth fundamental policy-based explanation of the increase in agricultural exports was the pursuit of a stable macroeconomic policy whose purpose was to give entrepreneurs confidence in the system and enable them to plan their activities over the longer term. Many of the export-oriented agricultural activities required sizable investments that could only be undertaken in an environment of stability and policy continuity. What is most remarkable, perhaps, is that since 1989 poverty and inequality have have been reduced significantly.
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EVOLUTION OF THE ECONOMY
The Colonial Era to 1950
In colonial times, the segmentation of Chile into latifundios (see Glossary) left only small parcels for native American and mestizo (see Glossary) villagers to cultivate. Cattle raised on the latifundios were a source of tallow and hides, which were sent, via Peru, to Spain. Wheat was Chile's principal export during the colonial period. From the inquilinos (peons), indentured to the encomenderos (see Glossary), or latifundio owners, to the merchants and encomenderos themselves, a chain of dependent relations ran all the way to the Spanish metropolis (see The Colonial Economy , ch. 1).
After Chile won its independence in 1818, the economy prospered through a combination of mercantilist and free-market policies. Agricultural exports, primarily wheat, were the mainstay of the export economy. By mid-century, however, Chile had become one of the world's leading producers of copper. After Chile defeated Bolivia and Peru in the War of the Pacific (1879-83), nitrate mines in areas conquered during the war became the source of huge revenues, which were lavished on imports, public works projects, education, and, less directly, the expansion of an incipient industrial sector (see The Liberal Era, 1861-91 , ch. 1). Between 1890 and 1924, nitrate output averaged about a quarter of GDP. Taxes on nitrate exports accounted for about half of the government's ordinary budget revenues from 1880 to 1920. By 1910 Chile had established itself as one of the most prosperous countries in Latin America.
Dependence on revenues from nitrate exports contributed to financial instability because the size of government expenditures depended on the vagaries of the export market. Indeed, Chile was faced with a severe domestic crisis when the nitrate bonanza ended abruptly during World War I as a result of the invention of synthetic substitutes by German scientists. Gradually, copper replaced nitrates as Chile's main export commodity. Using new technologies that made it feasible to extract copper from lowergrade ores, United States companies bought existing Chilean mines for large-scale development.
Chile initially felt the impact of the Great Depression (see Glossary) in 1930, when GDP dropped 14 percent, mining income declined 27 percent, and export earnings fell 28 percent. By 1932 GDP had shrunk to less than half of what it had been in 1929, exacting a terrible toll in unemployment and business failures. The League of Nations (see Glossary) labeled Chile the country hardest hit by the Great Depression because 80 percent of government revenue came from exports of copper and nitrates, which were in low demand.
Influenced profoundly by the Great Depression, many national leaders promoted the development of local industry in an effort to insulate the economy from future external shocks. After six years of government austerity measures, which succeeded in reestablishing Chile's creditworthiness, Chileans elected to office during the 1938-58 period a succession of center and left-of-center governments interested in promoting economic growth by means of government intervention.
Prompted in part by the devastating earthquake of 1939, the Chilean government created the Production Development Corporation (Corporación de Fomento de la Producción--Corfo) to encourage with subsidies and direct investments an ambitious program of importsubstitution industrialization. Consequently, as in other Latin American countries, protectionism became an entrenched aspect of the Chilean economy.
Import-substitution industrialization was spurred on by the advent of World War II and the loss of access to many imported products. State enterprises in electric power, steel, petroleum, and other heavy industries were also created and expanded during the first years of the industrialization process, mostly under the guidance of Corfo, and the foundations of the manufacturing sector were set. Between 1937 and 1950, the manufacturing sector grew at an average yearly real rate of almost 7 percent.
Despite initially impressive rates of growth, importsubstitution industrialization did not produce a sustainable expansion of the manufacturing sector. With the industrialization process evolved an array of restrictions, controls, and often contradictory regulations. With time, consumer-oriented industries found that their markets were limited in a society where a large percentage of the population was poor and where many rural inhabitants lived at the margins of the money economy. The economic model did not generate a viable capital goods (see Glossary) industry because firms relied on imports of often outmoded capital and intermediate goods. Survival often depended on state subsidies or state protection. In fact, it was because of these import restrictions that many of the domestic industries were able to survive. For example, a number of comparative studies have indicated that Chile had one of the highest, and more variable, structures of protection in the developing world. As a consequence, many, if not most, of the industries created under the importsubstitution industrialization strategy were inefficient. Also, it has been argued that this strategy led to the use of highly capital-intensive production (see Glossary), which, among other inefficiencies, hampered job creation. Additionally, the importsubstitution industrialization strategy generated an economy that was particularly vulnerable to external shocks.
During the import-substitution industrialization period, copper continued to be the principal export commodity and source of foreign exchange, as well as an important generator of government revenues. The Chilean government's retained share of the value of copper output increased from about one-quarter in 1925 to over four-fifths in 1970, mainly through higher taxes. Although protectionist policies better insulated Chile from the occasional shocks of world commodities markets, price shifts continued to take their toll.
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Economic Policies, 1950-70
Between 1950 and 1970, the Chilean economy expanded at meager rates. GDP grew at an average rate of 3.8 percent per annum, whereas real GDP per capita increased at an average yearly rate of 1.6 percent. Over this period, Chile's economic performance was the poorest among Latin America's large and medium-size countries.
As in most historical cases, Chile's import-substitution strategy was accompanied by an acute overvaluation of the domestic currency that precluded the development of a vigorous nontraditional (that is, noncopper) export sector. Although some agrarian reform was attempted, the government increasingly resorted to controlling agricultural prices in order to subsidize the urban working and middle classes. The agricultural sector was particularly harmed by the overvaluation of Chile's currency. The lagging of agriculture became, in fact, one of the most noticeable symptoms of Chile's economic problems of the 1950s and 1960s. Over this period, manufacturing and mining, mainly of copper, significantly increased their shares in total output.
By the early 1960s, most of the easy and obvious substitutions of imported goods had already been made; the process of import substitution was rapidly becoming less dynamic. For example, between 1950 and 1960 total real industrial production grew at an annual rate of only 3.5 percent, less than half the rate of the previous decade.
During the 1950s, inflation, which had been a chronic problem in Chile since at least the 1880s, became particularly serious; the rate of increase of consumer prices averaged 36 percent per annum during the decade, reaching a peak of 84 percent in 1955. The main source of the inflationary pressure on the Chilean economy was a remarkably lax fiscal policy. Chile's economic history has been marked by failed attempts to curb inflation. During the 1950s and 1960s, three major stabilization programs, one in each administration, were launched. The common aspect of these efforts was the emphasis placed on tackling the various consequences of inflationary pressures, such as prices, wages, and exchange-rate increases, rather than the root cause of money growth, the monetization of the fiscal deficit. In spite of the efforts of presidents Carlos Ibáñez del Campo (1927-31, 1952-58) and Jorge Alessandri Rodríguez (1958-64), inflation averaged 31 percent per annum during these two decades. In 1970, the last year of the government of President Eduardo Frei Montalva (1964-70), the inflation rate stood at 35 percent.
During the 1960s, and especially during the Frei administration, some efforts to reform the economy were launched. These included an agrarian reform, a limited liberalization of the external sector, and a policy of minidevaluations aimed at preventing the erosion of the real exchange rate. Under the 1962 Agrarian Reform Law, the Agrarian Reform Corporation (Corporación de Reforma Agraria--Cora) was created to handle the distribution, but land reform proved to be slow and expensive. In spite of these and other reforms, toward the end of the 1960s it appeared that the performance of the economy had not improved in relation to the previous twenty years. Moreover, the economy was still heavily regulated.
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The Popular Unity Government, 1970-73
In September 1970, Salvador Allende, the UP candidate, was elected president of Chile. Over the next three years, a unique political and economic experience followed. The UP was a coalition of left and center-left parties dominated by the Socialist Party (Partido Socialista--PS) and the Communist Party of Chile (Partido Comunista de Chile--PCCh), both of which sought to implement deep institutional, political, and economic reforms. The UP's program called for a democratic "Chilean road to socialism" (see Salvador Allende's Leftist Regime, 1970-73 , ch. 1).
When Allende took office in November 1970, his UP government faced a stagnant economy weakened by inflation, which hit a rate of 35 percent in 1970. Between 1967 and 1970, real GDP per capita had grown only 1.2 percent per annum, a rate significantly below the Latin American average. The balance of payments (see Glossary) had shown substantial surpluses during all but one of the years from 1964 to 1970, and, at the time the UP took power, the Central Bank of Chile (see Glossary) had a stock of international reserves of approximately US$400 million.
The UP had a number of short-run economic objectives: initiating structural economic transformations, including a program of nationalization; increasing real wages; reducing inflation; spurring economic growth; increasing consumption, especially by poorer people; and reducing the economy's dependence on the rest of the world. The UP's nationalization program was to be achieved by a combination of new legislation, requisitions, and stock purchases from small shareholders. The other goals--output and increased consumption, with rising salaries and declining inflation--were to be accomplished by a boost in aggregate demand, mainly generated by higher government expenditures, accompanied by strict price controls and measures to redistribute income.
The UP's macroeconomic program was based on several key assumptions, the most important being that the manufacturing sector had ample underutilized capacity. This provided the theoretical basis for the belief that large fiscal deficits would not necessarily be inflationary. The lack of full utilization was, in turn, attributed to two fundamental factors: the monopolistic nature of the manufacturing industry and the structure of income distribution. Based on this diagnosis, it was thought that if income were redistributed toward the poorer groups through wage increases and if prices were properly controlled, there would be a significant expansion of demand and output.
In regard to inflation, the UP program placed blame on structural rigidities (namely, slow or no response of quantity supplied to price increases), bottlenecks, and the role of monopolistic pricing, and it played down the role of fiscal pressures and money creation. Little attention was paid to the financial sector, given the orientation of the new regime's economic technocrats toward the import-substitution, structuralist philosophy of the Economic Commission for Latin America. In fact, Allende's minister of foreign relations and vice president, Clodomiro Almeyda, relates in his memoirs how in the first postelection meeting of the economic team, these technocrats argued expressly and convincingly that monetary and financial management did not deserve too much attention. Alfonso Inostroza, the Central Bank president, stated in early 1971 that the main objective of the monetary policy was to "transform it into a key instrument . . . to achieve the complete mobilization of productive resources, and their allocation to those areas that the government gives priority to . . . ." This was consistent with the view of inflation of those espousing structuralism (see Glossary).
The UP perspective on the way the economy functioned ignored many of the key principles of traditional economic theory. This was reflected in the greatly diminished attention given to monetary policies, but also in the complete disregard of the exchange rate as a key variable in determining macroeconomic equilibrium. In particular, the UP program and policies paid no attention to the role of the real exchange rate as a determinant of the country's international competitive position. Moreover, the UP failed to recognize that its policies would not be sustainable in the medium term and that capacity constraints were going to become an insurmountable obstacle to rapid growth.
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Economic Crisis and the Military Coup
After assuming power in November 1970, the UP rapidly began to implement its program. In the area of structural reforms, two basic measures were immediately begun. First, agrarian reform was greatly intensified, and a large number of farms was expropriated. Second, the government proposed to change the constitution in order to nationalize the large copper mines, which were jointly owned by large United States firms and the Chilean state.
Government expenditures expanded greatly, and in 1971 real salaries and wages in the public sector increased 48 percent, on average. Salaries in the private sector grew at approximately the same rate. In the first two quarters of 1971, manufacturing output increased 6.2 percent and 10.6 percent compared with the same periods in the previous year. Manufacturing sales grew at even faster rates: 12 percent during the first quarter and 11 percent during the second quarter. Overall, the behavior of the economy in 1971 seemed to vindicate the UP economists: real GDP grew at 7.7 percent, average real wages increased by 17 percent, aggregate consumption grew at a real rate of 13.2 percent, and the rate of unemployment dipped below 4 percent. Also, and more important for the UP political leaders, income distribution improved significantly. In 1971 labor's share of GDP reached 61.7 percent, almost ten percentage points higher than in 1970. All of this created a sense of euphoria in the government.
On June 11, 1971, Congress approved unanimously an amendment to the constitution nationalizing large copper mines. As a result, reform of the banking system and large manufacturing firms was more difficult because the government lacked the institutional means to implement nationalization. Initially, this obstacle was alleviated because the government purchased blocks of shares, especially bank shares, at high prices. These share acquisitions were complemented by a process of requisition or expropriation of foreign-owned companies based on an old, and until then forgotten, decree law promulgated during Marmaduke Grove Vallejo's short-lived Socialist Republic of 1932.
All did not remain well in the economy in 1971. The UP's macroeconomic policies were rapidly generating a situation of repressed inflation. The high growth rate of GDP was largely the result of an almost 40 percent increase in imports of intermediate goods. The fiscal deficit had jumped from 2 percent of GDP in 1970 to almost 11 percent in 1971. The rate at which the money supply grew exceeded 100 percent in 1971. As a result, the stock of international reserves inherited by the Allende government was reduced by more than one-half in that year alone. A rapid reduction of inventories was another important factor in the expansion of consumption.
By the end of 1971, the mounting inflationary pressures had become evident. The economy was experiencing the consequences of an aggregate demand for goods and services well above the aggregate supply at current prices. This imbalance was aggravated by a series of labor disputes in many large establishments that resulted in the takeover of those firms by their workers. In fact, this procedure became the institutionalized way in which the government seized a large number of firms.
During 1972 the macroeconomic problems continued to mount. Inflation surpassed 200 percent, and the fiscal deficit surpassed 13 percent of GDP. Domestic credit to the public sector grew at almost 300 percent, and international reserves dipped below US$77 million.
The underground economy grew as more and more activities moved out of the official economy. As a result, more and more sources of tax revenues disappeared. A vicious cycle began: repressed inflation encouraged the informal economy, thus reducing tax revenues and leading to higher deficits and even higher inflation. In 1972 two stabilization programs were implemented, both unsuccessfully.
When evaluating the problems faced by the economy, UP economists generally held the view that the authorities had failed to impose appropriate controls in implementing Allende's program. This view guided the first, rather weak, attempt at stabilizing the economy that was launched in February 1972. Price controls were the main ingredient of the program. By mid-1972 it was apparent that the February stabilization program was a failure. The underground economy was now widespread, output had begun to fall, open inflation reached an annual rate of 70 percent in the second quarter, foreign-exchange reserves were very low, and the blackmarket value of the currency was falling rapidly. Parliamentary elections scheduled for March 1973 made the situation particularly difficult for the UP. In August 1972, a new stabilization program was launched under the political monitoring of the PCCh. This time, not only prices were officially controlled, but the distribution channels were taken over by the government, in an attempt to reduce the extent of the black market.
Unlike the previous plan, the August 1972 stabilization program was based on a massive devaluation of the escudo (for value of the escudo--see Glossary). The government expected that the result would be an easing of the mounting pressures on the balance of payments. The program also called for two basic measures to contain fiscal pressures. First, nationalized firms were authorized to increase prices as a means of reducing the financing requirements of the newly formed nationalized sector. Second, the program called for a massive increase in production, especially in the recently nationalized manufacturing and agriculture sectors (large manufacturing firms and farms had been expropriated arbitrarily). The devaluation and a large number of price increases resulted in annualized inflation rates of 22.7 percent in August and 22.2 percent in September.
In mid-August 1972, the government announced that it had drafted a new wage policy based on an increase in publicand private-sector wages by a proportion equal to the accumulated rate of inflation between January and September. In addition, the new policy called for more frequent wage adjustments.
During the first quarter of 1973, Chile's economic problems became extremely serious. Inflation reached an annual rate of more than 120 percent, industrial output declined by almost 6 percent, and foreign-exchange reserves held by the Central Bank were barely above US$40 million. The black market by then covered a widening range of transactions in foreign exchange. The fiscal deficit continued to climb as a result of spiraling expenditures and of rapidly disappearing sources of taxation. For that year, the fiscal deficit ended up exceeding 23 percent of GDP.
The depth of the economic crisis seriously affected the middle class, and relations between the UP government and the political opposition became increasingly confrontational. On September 11, 1973, the UP regime came to a sudden and shocking end with a military coup and President Allende's suicide.
When the military took over, the country was divided politically, and the economy was a shambles. Inflation was galloping, and relative price distortions, stemming mainly from massive price controls, were endemic. In addition, black-market activities were rampant, real wages had dropped drastically, the economic prospects of the middle class had darkened, the external sector was facing a serious crisis, production and investment were falling steeply, and government finances were completely out of hand.
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The Military Government's Free-Market Reforms, 1973-90
After the military took over the government in September 1973, a period of dramatic economic changes began. Chile was transformed gradually from an economy isolated from the rest of the world, with strong government intervention, into a liberalized, worldintegrated economy, where market forces were left free to guide most of the economy's decisions. This period was characterized by several important economic achievements: inflation was reduced greatly, the government deficit was virtually eliminated, the economy went through a dramatic liberalization of its foreign sector, and a strong market system was established.
From an economic point of view, the era of General Augusto Pinochet Ugarte (1973-90) can be divided into two periods. The first, from 1973 to 1982, corresponds to the period when most of the reforms were implemented. The period ended with the international debt crisis and the collapse of the Chilean economy. At that point, unemployment was extremely high, above 20 percent, and a large proportion of the banking sector had become bankrupt. During this period, a pragmatic economic policy that emphasized export expansion and growth was implemented. The second period, from 1982 to 1990, is characterized by economic recovery and the consolidation of the free-market reforms.
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Trade Policy
One of the fundamental economic goals of the military regime was to open up the economy to the rest of the world. However, this was not the first attempt at liberalizing international trade in Chile. Between 1950 and 1970, the country went through three attempts at trade liberalization without ever reaching full liberalization. Moreover, all three attempts quickly ended in frustration and in a reversion to exchange controls, the use of multiple exchange rates, and massive quantitative restrictions. A particularly interesting feature of the three attempts at liberalization is that, although they took place under three different exchange-rate systems, they all collapsed, at least in part because of a highly overvalued real exchange rate.
Starting in 1974, Chile adopted unilaterally an open trade regime characterized by low uniform import tariffs, a lack of exchange or trade controls, and minimum restrictions on capital movements. Starting in 1979, Chile's trade policy became highly liberalized; subsequently, there were no quantitative restrictions, licenses, or prohibitions. A uniform import tax varying between 10 percent and 35 percent took effect, and, until 1980, real exchangerate overvaluation generally was avoided. By 1990 Chile was the only country, according to the World Bank, whose index of liberalization reached the maximum possible level of 20, indicating an absence of external-sector distortions.
In 1973 import tariffs averaged 105 percent and were highly dispersed, with some goods subject to nominal tariffs of more than 700 percent and others fully exempted from import duties. In addition to tariffs, a battery of quantitative restrictions were applied, including outright import prohibitions and prior import deposits of up to 10,000 percent. These protective measures were complemented by a highly distorting multiple exchange-rate system consisting of fifteen different nominal exchange rates. By August 1975, all quantitative restrictions had been eliminated, and the average tariff had been reduced to 44 percent. This process of tariff reductions continued until June 1979, when all tariffs but one (that on automobiles) were set at 10 percent. In the mid-1980s, in the midst of the debt crisis, temporary tariff hikes were implemented; by 1989, however, a uniform level of 15 percent had been established.
During the early period (1975-79) of the military regime, the opening of Chile's external sector was accompanied by a strongly depreciated real exchange rate. In 1979, however, the authorities adopted a fixed-exchange rate policy that resulted in an acute overvaluation of the Chilean peso (for value of the Chilean peso-- see Glossary), a loss in international competititiveness, and, in 1982, a deep crisis. In 1984-85 this situation was reversed, and a policy of a depreciated and highly competitive real exchange rate was implemented. The combination of these two policies--low tariffs and a competitive real exchange rate--had a significant impact on Chile's economic structure. The share of manufacturing in GNP dropped from almost 29 percent in 1974 to 22 percent in 1981. Productivity in tradable sectors grew substantially, and exports became highly diversified. Chile had also diversified its export markets, with the result that no individual market bought more than 20 percent of the country's total exports. By the early 1990s, exports had become the engine of growth, and the Chilean trade reform was winning praise from multinational institutions and observers of different ideological persuasions. Largely thanks to the boom in exports between 1986 and 1991, particularly the increasing growth in exports of fresh fruits and manufactured products, Chile experienced the highest rate of GDP growth in Latin America (the "Chilean miracle"), with an annual increase of 4.2 percent.
In what was perhaps the surest sign of the success of trade reform, the new democratic government of President Patricio Aylwin Azócar (1990-94), elected in December 1989, decided to continue the opening process and reduced import tariffs to a uniform 11 percent. Interestingly, Aylwin's economic team, including the minister of finance and the minister of economy, development, and reconstruction, had been relentless critics of the trade reform process during its implementation in the mid- and late 1970s.
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Banking Reform and the Financial Sector
A major policy objective of the military regime was the liberalization and modernization of the banking sector. Until 1973 the domestic capital market had been highly repressed, with most banks being government owned. Real interest rates were negative, and there were quantitative restrictions on credit. The liberalization process began slowly, in early 1974, with the sale of banks back to the private sector, the freeing of interest rates, the relaxation of some restrictions on the banking sector, and the creation of new financial institutions. International capital movements, however, were strictly controlled until mid-1979. In June 1979, the government decided to begin to liberalize the capital account (see Glossary) of the balance of payments, lifting some restrictions on medium- and long-term capital movements.
The opening of the capital account resulted in a massive inflow of foreign capital that contributed to Chile's subsequent international debt problems. In 1980 capital inflows were more than double those of 1979--US$2.5 billion versus US$1.2 billion--and in 1981 the level of capital inflows nearly doubled again, to US$4.5 billion.
An important result of the reforms of the financial sector was that the number of financial institutions and the volume of financial intervention both increased greatly. For example, in 1981 there were twenty-six national banks, nineteen foreign banks, and fifteen savings and loan institutions (financieras), a number significantly higher than the eighteen national banks and one foreign bank in operation in September 1973. Furthermore, between 1973 and 1981 the real volume of total credit to the private sector increased by more than 1,100 percent.
At least in terms of increasing the degree of financial intermediation, liberalization was a success. However, it was apparent from the beginning that capital-market liberalization faced three major obstacles. First, interest rates were very high. Second, in spite of the significant growth in the extent of financial intermediation, domestic savings had not increased to the extent that the proponents of the reforms had expected. In fact, domestic savings were at one of their lowest levels in history from 1974 to 1982. There are several possible explanations for the behavior of domestic savings. One of the most popular of these relies on the notion that the appreciation of domestic assets that was taking place at the time, such as stocks and land prices, resulted in a real accumulation of assets without saving. This increase in private-sector wealth was consistent with higher levels of consumption at a given income. Third, and perhaps more important, the rapid growth of the financial sector took place in an environment in which monetary authorities exercised no supervision. As a result, many banks accumulated an unprecedented volume of bad loans, a situation that led to the financial crisis of 1982-83. As a consequence of this crisis, a number of banks went bankrupt during 1983-84, were placed temporarily under government control, and then were reprivatized. By 1992, after monetary authorities had learned the hard way the importance of bank supervision, Chile's financial sector had become highly stable and dynamic.
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Rural Land Market Reform
At the time of the military coup, about 60 percent of Chile's irrigated land and 50 percent of total agricultural land was in control of the public sector. Land reform had started in the 1960s with expropriations of large landholdings (those larger than eighty basic irrigated hectares--BIH), and the encouragement of small farms (about 8.5 BIH) managed by their owners. The Allende administration favored large-scale farms under cooperatives and state-farm management over private ownership of agricultural land. Starting in 1974, the military government began using Cora to end agrarian reform by distributing land to establish family farms with individual ownership. In a period of three years, 109,000 farmers and 67,000 descendants of the Mapuche had been assigned property rights to small farms. About 28 percent of the expropriated land was returned to previous owners, and the rest was auctioned off.
Three key legal issues were then clarified by decree law in 1978. Government authority to expropriate land was repealed, the ceilings on landholdings (the equivalent of eighty BIH) were removed, and the ban on corporate ownership of land was eliminated. At the end of 1978, all farmland owned publicly had been distributed, and Cora was legally closed.
Reforms in the legislation that regulated land rentals and land subdivisions in 1980 added flexibility to the rural land markets. But perhaps more crucial aspects of the reforms were the separation of water rights from the land itself and the legal possibility of transferring water titles independently of land transactions.
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Labor-Market Reform
Immediately after the 1973 coup, many labor institutions, that is, traditional channels of influence, such as government offices, which unions used to get their voices heard, were disbanded, and some important unions were dissolved. Thus, wage adjustments became mainly a function of indexation, which, given Chile's history of inflation, had become an established element of any wage negotiation. Indexation was kept in place until 1982, through ten years of declining inflation.
Starting in October 1973, the government mandated across- theboard periodic wage adjustments tied to the rate of inflation. Lower wages were adjusted proportionally more than higher ones. From 1973 to 1979, indexation to past inflation with varying lags was the norm throughout the economy. The 1979 Labor Plan formalized this practice by requiring that collective bargaining agreements allow for wage adjustments at or above the rate of inflation. In 1982 the indexation clause of the Labor Plan was eliminated. The government continued the practice of periodically announcing wage readjustments and bonuses, with the wage increases usually not keeping pace with inflation and covering the nonunionized sector only. The dynamism of the economy in the early 1990s resulted in actual wage increases above officially announced readjustments.
The Employment Security Law established that in the absence of "just cause" for dismissal, such as drunkenness, absenteeism, or theft, a dismissed employee could be reinstated to the job by a labor court. This law was replaced by a less costly system of severance payments in 1978. Decree Law 2,200 authorized employers to modify individual labor contracts and to dismiss workers without "cause." A minimum severance payment was established that was equivalent to one month of salary per year of service, up to a maximum of five months' pay. This new system applied to all contracts signed after August 1981.
The changes introduced by Decree Law 2,200, along with the 1979 reforms, which established new mechanisms to govern union activity (Decree Law 2,756) and collective bargaining (Decree Law 2,758), became known in Chile as the Labor Plan. Decree Law 2,756 departed significantly from traditional legislation: union affiliation within a company became voluntary, and all negotiations would now have to be conducted at the company level; bargaining among many companies would be eliminated. According to the previous law, which had applied until the 1973 coup, once the majority of the workers of an enterprise chose to join an "industrial union" all workers became part of that union. That is, one union would have exclusive representation of all workers in an enterprise. The right to collective bargaining was granted to unions at the enterprise level and also to union federations and confederations. This resulted in some negotiations at the industry level with the participation of the Ministry of Labor and Social Welfare through the Labor Inspectorate. As in the past, the new law required participation of 10 percent of the workers or a minimum of twenty-five workers (whichever was greater) for creation of a union. Workers were not required to be represented by a union in collective bargaining.
Decree Law 2,758 stipulated that in the event of a strike, a firm could impose a lockout and temporarily lay off workers, which the previous law had prohibited. At the same time, Decree Law 2,758 established norms about collective bargaining, and in its Article 26 the law established that unionized workers' nominal wages should be adjusted to at least match the rate of inflation. This article, which became a severe constraint to downward real wage flexibility during the 1982-83 crisis, can be understood only in the context of a previously existing policy of 100 percent indexation across the board. In 1982, at the onset of the debt crisis, Article 26 was amended, eliminating the downward inflexibility of real wages. This reformed law was in effect until April 1991, when some important changes proposed by the Aylwin administration were approved by the National Congress (hereafter, Congress).
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Public Employment Programs
Two public employment programs affected the labor market during the period of economic reforms between 1975 and 1987. The Minimum Employment Program (Programa de Empleo Mínimo--PEM) was created in 1975 at a time when unemployment had reached record levels. The program, administered by local governments, paid a small salary to unemployed workers, who, for a few hours a week, performed menial public works. At first, the government tightly restricted entry into the program. Gradually, most of these restrictions were lifted, and a larger number of unemployed people were allowed to participate. Thus, the proportion of the labor force employed by the program remained virtually constant between 1977 and 1981, despite the economic recovery and a reduction in the real value of PEM compensation.
When Chile entered a new and more severe recession, the number of individuals employed by PEM in the Metropolitan Region of Santiago increased from about 23,000 in May 1982 to 93,000 in May 1983. An Employment Program for Heads of Households (Programa de Ocupación para Jefes de Hogar--POJH), created in October 1982, employed about 100,000 individuals in the greater Santiago area by May 1983. The two programs combined absorbed more than 10 percent of the labor force of the greater Santiago area in May 1983. These programs were also implemented in other regions of the country. The PEM program was cut back drastically in February 1984. Likewise, by December 1988, there were only about 5,000 individuals employed by the POJH in the entire country.
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The Debt Crisis: Further Reforms and Recovery
The international debt crisis unleashed in 1982 hit the Chilean economy with particular severity, as foreign loans dried up and the international terms of trade (see Glossary) turned drastically against Chile. The policies implemented initially to face the 1982 crisis can best be described as hesitant. In early 1983, the financial sector was nationalized as a way to avoid a major banking crisis, and a number of subsidy schemes favoring debtors were enacted. The decision to subsidize debtors who had borrowed in foreign currency during the period of fixed exchange rates, and to bail out the troubled banks, resulted in heavy Central Bank losses, which contributed to the creation of a huge deficit in publicsector finance. This deficit, in turn, would become one of the underlying causes of the inflation of the early 1990s. Different exchange-rate systems were tried, including a floating rate, only to be abandoned rapidly and replaced by new plans. Policies aimed at restructuring the manufacturing sector, which had entered a deep crisis as a consequence of the collapse of some of the major conglomerates, the so-called groups (grupos), were implemented. In spite of this array of measures, the economy did not show a significant response; unemployment remained extraordinarily high, and the external crisis, which some had expected to represent only a temporary setback, dragged on.
In early 1985, increasingly disappointed by the economy's performance, Pinochet turned toward a group of pragmatic economists who favored free markets and macroeconomic stability. Led by newly appointed finance minister Hernán Büchi Buc, an economist who had studied business administration at Columbia University, the new economic team devised a major adjustment program aimed at reestablishing growth, reducing the burden of the foreign debt, and rebuilding the strength of the financial and manufacturing sectors. Three policy areas became critical in the implementation of the program: active macroeconomic policies, consolidation of the market-oriented structural reforms initiated in the 1970s, and debt-management policies geared toward rescheduling debt payments and making an aggressive use of the secondary market. With the help of the International Monetary Fund ( IMF--see Glossary), the World Bank, and improved terms of trade, these policies succeeded in achieving their objectives.
The macroeconomic program of a group of Chilean economists known as the "Chicago boys" (see Glossary), who had guided Pinochet's early economic policies, had relied on a hands-off "automatic adjustment" strategy. By mid-1982 this approach had generated a severe overvaluation of the real exchange rate. By contrast, the new macroeconomic program relied on active and carefully monitored macroeconomic management. An active exchangerate policy, based on large initial exchange-rate adjustments followed by periodic small devaluations, became one of the most important policies of the post-1982 period. Between 1982 and 1988, the international competitiveness of Chilean exports was increased greatly by a real exchange-rate depreciation of approximately 90 percent. This policy not only helped generate a boom in nontraditional exports but also contributed to reasonable interest-rate levels and to the prevention of capital flight.
The adjustment program that started in 1985 also had a structural adjustment component that was aimed at consolidating the market-oriented reforms of the 1970s and early 1980s, including the privatization process, the opening of the economy, and the development of a dynamic capital market. There were several structural goals of the 1985 program: rebuild the financial sector, which had been nearly destroyed during the 1982 crisis; reduce import tariffs below the 35 percent level that they had reached during 1984 to a 15 percent uniform level; and promote exports through a set of fiscal incentives and a competitive real exchange rate.
Perhaps the most important aspects of these structural reform measures were the privatization and recapitalization of firms and banks that had failed during the 1982-83 crisis. As a first step in this process, the Central Bank bought private banks' nonperforming portfolios. In order to finance this operation, the Central Bank issued domestic credit. The banks, in turn, paid a rate of 5 percent on the nonperforming portfolios and promised to repurchase them out of retained profits. This recapitalization program had as its counterpart a privatization plan that returned the ownership of those banks and firms that had been nationalized in 1983 to the private sector. Economist Rolf J. Lüders estimates that about 550 enterprises under public-sector control, including most of Chile's largest corporations, were privatized between 1974 and 1990. By the end of 1991, fewer that fifty firms remained in the public sector. The overall privatization program undertaken after 1985 has been criticized by some Chileans and also by some international economists because banks and manufacturing firms were sold too rapidly and at "very low prices."
Chile's structural adjustment of the second half of the 1980s was unique from an international comparative perspective. The most difficult, controversial, and costly reforms--including the bulk of privatization, trade liberalization, financial deregulation, and labor market streamlining--were undertaken in Chile in the 1975-80 period; the measures taken after 1985 were minor, in comparison. The success of the post-1985 period was rooted in the early reforms. For example, the boom in nontraditional exports that took place in the second half of the 1980s was only possible because of investments begun almost ten years before. The markets' flexible and rapid response to incentives was also a direct consequence of the microeconomic reforms of the 1970s.
One of the most hotly debated issues of the Chilean recovery of the second half of the 1980s concerns the different foreign-debt conversion plans aimed at rapidly reducing foreign indebtedness. When the debt crisis erupted in 1982, Chile's foreign debt was US$17.2 billion, one of the highest debts per capita in the world. Through the aggressive use of a variety of debt-conversion plans, between 1985 and 1991 Chile retired an estimated US$10.5 billion of its debt, most of which was converted into equity in Chilean companies.
Chile's net international reserves totaled US$9 billion in 1992, enough to cover a year of imports and equivalent to roughly half of its foreign debt. The stock of foreign direct investment in Chile was estimated to be between US$10 billion and US$13 billion, roughly 30 percent of GDP. About US$4 billion of this was acquired through debt-equity conversions. The debt-swap program was ended when the growth of direct investment and the strength of the economy had done away with the need for special incentives to attract foreign capital.
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The Return to Democracy, 1990
Continuity in Economic Policy
For years, opponents of the Pinochet government had argued that its economic program was based on ideas alien to the Chilean tradition. In early 1990, analysts, scholars, stockbrokers, and politicians throughout the world wondered if the new democratic government of President Aylwin would maintain some, or for that matter any, of the most important aspects of the military government's market-oriented policies, or if the CPD government would reform the system along the lines of the decade-long criticisms of the opposition. What made this question particularly interesting was that at the time of the restoration of democracy, Chile was considered by many, including international institutions such as the World Bank and the IMF, as a premier example of the way the adjustment process after the debt crisis should be carried out. A number of analysts asked themselves how the advent of democracy would affect Chile's economic policy. In particular, analysts were concerned about the new government's attitude toward the free price system and Chile's new openness to international competition.
Regarding price competition, the Aylwin program's position was stated as follows: "We affirm that within an efficient economic policy there is no role for price controls." In discussing the role of the market, the program noted: "The market cannot be replaced as a mechanism for consumers to articulate their preferences." These views were a far cry from those sustained by Frei's Christian Democratic government of the 1960s and, especially, from those of Allende's UP government of 1970-73. They were also substantially different from those of the new market critics of the 1970s and mid-1980s. Indeed, the CPD program conveyed that there had been a significant convergence of domestic views on the role of markets in the economic process.
Addressing the opening of the economy to the rest of the world, the CPD program stated: "The most important instruments of the external sector policy are the maintenance of a stable high real exchange rate and a reasonably low import tariff" [emphasis added]. This statement suggests that from its onset the Aylwin government was not prepared to implement major changes to one of the most fundamental features of Chile's new economics.
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Emphasis on Social Programs
In seeking funding for new social programs, the Aylwin government made clear immediately that the only way of increasing social spending without generating unsustainable macroeconomic pressures was by finding secure sources of government revenue. Economists associated with Alywin's CPD coalition calculated in 1989 that in order to implement their antipoverty social programs, annual funds on the order of 4 percent of GDP would be required. They argued that these resources could be obtained through a combination of expenditures, reallocation, foreign aid, and increased tax revenues. In order to implement these programs rapidly, in April 1990 President Aylwin submitted to the newly elected Congress a legislative proposal aimed at reforming the tax system. The main features of the package were the following: the corporate income-tax rate was to be increased temporarily from 10 percent to 15 percent for 1991-93; and the tax base, which in 1985 had been defined as distributed profits, was to be broadened to include total profits. The progressiveness of the personal income tax was to be increased by reducing the income level at which the maximum rate was applicable; and the rate of the value-added tax ( VAT--see Glossary) would be increased to 18 percent from 16 percent. During most of the Pinochet government, the VAT rate had been 20 percent. It was only reduced to 16 percent prior to the electoral contest before the plebiscite on Pinochet's continuation in power. After intense and often frustrating negotiations between the Aylwin administration and the opposition, the tax reform was approved in late 1990.
Pinochet's labor reforms of 1978-79 had been, from the beginning, strongly criticized by the opponents of the military regime. Although the 1979 decrees had modernized labor relations in some areas, they had also severely limited the activities of unions and, as initially conceived, had made real wage rates unusually rigid. Reforming the labor plan was an important priority of the new democratic government.
After the support of some opposition senators was obtained, a mild labor reform was passed in 1991. An important characteristic of Chile's constitution of 1980 is that it stipulates the seating of nine nonelected senators in the legislature's upper house, as well as former presidents and former justices of the Supreme Court. The CPD coalition lacked a parliamentary majority because the nonelected senators had been appointed by Pinochet. Consequently, in order to approve legislation it had to obtain support from the opposition for some measures.
The new labor legislation restricted the causes for firing employees, increased the compensation that firms had to pay to lay off employees, and restricted employers' recourse to lockouts. Although there was little doubt that these new regulations had increased the cost of labor, it was too early to know the effect of the new legislation on job creation. It was known, however, that the reform of labor laws by a democratically elected government had greatly legitimated the modernization of labor relations. In a way, the concept of labor-market flexibility had ceased to be associated exclusively with the authoritarian military regime and had become generally accepted by the population at large.
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THE CURRENT STRUCTURE OF THE ECONOMY
A World Bank study shows that after the trade liberalization of the 1970s, Chile experienced a substantial increase in productivity. This study also shows that in the 1987-91 period, Chile's productivity increased much more than that of any other country in Latin America. Chile's national accounts for 1989-91 show a number of interesting features (see table 20, Appendix). First, the share of agriculture, livestock, and forestry in GDP decreased during these three years from 8.1 percent to 7.9 percent. This short-term trend, however, was somewhat misleading. In 1971 the share of GDP generated by agriculture, livestock, and forestry had been 7.4 percent. From a historical perspective, the increase in the relative importance of the primary sector in a twenty-year span--from 7.4 percent to 7.9 percent of GDP--was somewhat of an anomaly. A well-documented trend is that in the vast majority of countries, as income and output expand and national economies become more developed, this sector generates a smaller share of GDP. In the case of Chile, the absence of this phenomenon can be explained by the drastic structural reforms implemented in the second half of the 1970s and in the 1980s. An important consequence of the market-oriented reforms of the Pinochet government was the elimination of discrimination against export agriculture that had characterized the Chilean economy during the decades of importsubstitution industrialization. The level of productivity of the agricultural sector (measured as crop yields) had increased significantly by the early 1990s (see Agriculture , this ch.).
A second important feature of Chile's national accounts in 1989-91 is that the manufacturing sector represented approximately 21 percent of GDP for the period. This was significantly lower than this sector's share of total output in 1969-70, when it was almost 25 percent. The reduced participation of manufacturing also reflected the structural reforms of the 1970s and 1980s. Those policies had eliminated the protection walls that had artificially encouraged Chile's industrial sector during the 1960s.
The share of mining in GDP remained roughly constant from 1967 to 1992. However, the composition of mining production changed substantially; in particular, there was a drop in the importance of copper mining. Also, construction's share of GDP shrank from 7.7 percent of GDP in 1970 to 6.0 percent in 1992. During the same period, the share of services increased from 26 percent to 29.1 percent. Within this sector, a particularly significant increase occurred in the financial area (see fig. 8).
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Industry and Manufacturing
The Chilean manufacturing sector experienced strong performance in the 1985-91 period, and the Industrial Development Association (Sociedad de Fomento Fabril--Sofofa) expected a 7 percent to 10 percent increase in industrial output in 1992. (The sector actually grew 12.3 percent during the first three quarters.) Between 1985 and 1991, the manufacturing sector grew at an average annual rate of 6.2 percent, a figure that compared favorably with the average rate for the 1960s of 5.1 percent per annum. However, in spite of the dynamic behavior of manufacturing as a whole, the development of different industries within the sector was uneven. Some industries were able to exploit Chile's comparative advantages, expanding at a rapid pace. In many cases, this expansion was the result of the development of new international markets and of rapidly growing exports. Other industries, however, were victims of drops in relative prices, caused either by trade liberalization or by loss of international buyers, and were forced to reduce their scope of operations.
The major industries of the Chilean economy in the late 1980s and early 1990s were agriculture and food products, textiles and clothing, nonelectrical machinery, transportation equipment, and industrial chemicals. As noted previously, the performance of individual industries was uneven (see table 21, Appendix). Although foodstuffs, furniture, and glass products experienced strong expansion, other industries had a lower level of output in 1991 than in 1979.
For decades, wine has been one of Chile's best-known products, and wineries were expected to experience double-digit growth in the 1990s. Exports of wine increased during the 1970s, primarily to the United States, reaching US$31.9 million in 1989. Total wine exports in 1992 were estimated at US$127 million. By that year, Chile had become the third largest exporter of wine to the United States, behind Italy and France.
Not surprisingly, those sectors that had shrunk since the early 1980s, such as footwear and transportation equipment, were those that had been hardest hit by increased foreign competition. However, the firms that finally survived in these sectors did so by adapting to the new external circumstances and by finding ways to rapidly increase productivity. In 1992 the transportation equipment sector was the most dynamic of all, increasing output at an annual rate of 46 percent.
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Mining
Although copper's relative importance declined in the 1970s and 1980s, it was still the Chilean economy's most important product in 1992. The mining sector represented 6.7 percent of GDP in 1992, as compared with 8.9 percent in 1985. In 1991 copper exports represented 30 percent of the total value of exports, a substantial decline with respect to the 1960s, when it represented almost 80 percent of total exports. Mining exports in general accounted for about 48 percent of total exports in 1991.
Since the late 1970s, the production of gold and silver has increased greatly (see table 22, Appendix). The lead, iron, and petroleum industries have shrunk since the mid-1970s, the result of both adverse international market conditions and declines in the availability of some of these resources. With a combined total value of about US$4 billion, two of the largest investments planned in Chile in the early 1990s were designated for aluminum-smelter projects in the Puerto Aisén and Strait of Magellan areas.
Two developments in the copper sector were noteworthy. First, in the 1987-91 period there was a substantial increase in the output of refined copper, as well as a relative decline in the production of blister copper (see table 23, Appendix). Second, the state-owned Copper Corporation (Corporación del Cobre--Codelco), the world's largest copper producer, still had an overwhelmingly dominant role (accounting for 60 percent of Chile's copper output in 1991). The so-called Codelco Law of April 1992 authorized Codelco for the first time to form joint ventures with the private sector to work unexploited deposits. Thus, in a major step for Codelco, in 1992 it invited domestic and foreign mining firms to participate in four joint explorations in northern Chile. Poreignowned private firms were to become increasingly important as new investment projects got underway. The heightened importance of these foreign private firms in large-scale copper mining also resulted from the international business community's improved perception of Chile and from a mining law enacted during the Pinochet regime that clearly established compensation rules in the case of nationalization and otherwise encouraged investment in this sector. Given this more favorable context, Phelps Dodge, a United States mining company, and the Sumitomo Metal Mining Company, a Japanese firm, signed a US$1.5 billion contract in 1992 with the Chilean government to develop La Candelaria, a copper and gold mine south of Copiapó. The mine's potential production of refined copper was equivalent to about 10 percent of Codelco's entire production.
Despite the decline in copper's importance, Chile continued to be affected by the vagaries of the international copper market. The high variability of copper prices affected the Chilean economy, particularly the external accounts and the availability of foreign exchange, in several ways. In the 1987-91 period, the international copper market was very favorable; for example, copper prices in 1989 were 50 percent higher than in 1980. By May 1992, however, the price of copper had declined to about its 1980 level. The government decided to counteract the effect of the variability of copper prices by creating the Copper Stabilization Fund, which worked as follows: whenever the price of copper increased, the government would direct a proportion of the increased revenues into the fund; these resources would then be used during those years when the price of copper fell below its "normal" level. This institutional development helped Chile at least partially free itself from the volatility of the copper market.
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Agriculture
As a result of land appropriations from 1970 to 1973, extensive disinvestment occurred in the agricultural sector. The Pinochet government reversed this trend by returning lands to previous owners and providing incentives for increased exports. Although Chile was basically a net importer of agricultural goods from 1960 to 1970, by 1991 agricultural exports, as well as forestry and fishing exports, were becoming increasingly important in the economy. Whereas in 1970 Chile exported US$33 million in agriculture, forestry, and fishing products, by 1991 the figure had jumped to US$1.2 billion. This figure excluded those manufactured goods based on the products of the agriculture, livestock, and forestry sectors.
In the 1989-91 period, exports of fresh fruits became increasingly important (see table 24, Appendix). Data also indicate that production of grapes, pears, lemons, and peaches was expanding rapidly (see table 25, Appendix). The country's virtual monopoly on grape exports during the Northern Hemisphere's winter season was likely to disappear as other potential giants, such as Argentina, began to compete. The fruit-packing industry also expanded greatly, providing seasonal employment to thousands of workers in its refrigerated plants. Although fruit production takes place in small to medium-size landholdings, fruit-packing plants are very large operations. Indeed, six of the major fruit-packing plants generated more than half of all the boxes exported.
Chile's success in export agriculture was not confined to fruits. Also increasing significantly was production of more traditional crops, many of which were devoted primarily to domestic consumption. Much of the increased agricultural production in the country was the result of rapidly improving yields and higher productivity (see table 26, Appendix). These figures are particularly impressive if compared with historical data. For example, in the 1969-70 agricultural year, wheat's yield was 12.5 quintals per hectare, that of corn was 32.4 tons per hectare, and that of potatoes was 95.4 tons per hectare. By 1990-91 these yields had increased to 34.1 quintals of wheat per hectare, 83.9 quintals of corn per hectare, and 142.2 quintals of potatoes per hectare.
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Fishing and Forestry
Fishing
The cold waters of South America's western coast are rich in fish and contain a wide variety of shellfish. For instance, about 800 varieties of mollusks are found there, including the largest abalones and edible sea urchins in the world. Some species, such as the abalones, had been depleted to the point that they could not be harvested legally. About 750 kilometers from the mainland, the waters surrounding the Islas Juan Fernández are much warmer and contain different types of fish and shellfish, including lobster.
Fishing expanded rapidly starting in the late 1970s. By 1983 Chile was ranked fifth in the world in catch tonnage and had become the world's leading exporter of fish meal. Despite naturally caused year-to-year variations, the volume of the total fish catch had increased over the long term. For example, in 1970 the total catch was 1.2 million tons, but the figures increased to 2.9 million tons in 1980 and 6.3 million tons in 1989. The total catch was about 5.4 million tons in 1990 according to Central Bank data. Total fish caught in 1991, reached 6 million tons, and fishing exports totaled US$1.1 billion, up 21 percent from 1990 and 138 percent from 1985 (see table 28, Appendix). Of the 1991 figure, fish meal accounted for US$466 million. Fish exports rose to 6.5 million tons in 1992.
Salmon production was expected to reach 46,000 tons in 1992, earning about US$250 million and turning the country into the third largest producer in the world (after Norway and Canada). Starting with fifty-three tons in 1981, the explosive growth in salmon production and exports reflected the combination of perfect natural conditions for its cultivation in the south with the successful adaptation of modern technology.
By the early 1990s, a lack of fishing regulations was threatening some species and giving the large fishing fleets advantages over the smaller-scale, traditional fishermen who use small boats. After long debate, Congress approved the new General Fishing Law in July 1991. The law's purpose was to encourage investment in commercial fishing by ensuring the conservation of hydrobiological resources, by protecting against overfishing, by reserving for traditional fishermen an exclusive eight-kilometer strip of coastal waters, and by promoting fishing research. The infrastructure plan also included providing resources for developing large and small ports for industrial and traditional fishing. Total output of industrialized fish products was expected to increase significantly with new investments during the 1990s. Both the good catches in the 1989-91 period and the openness of the regulations had prompted Chilean companies to invest a total of US$100 million and to build nearly twenty boats.
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Forestry
Beginning in 1975, the planting and exploitation of forests was subsidized heavily by the state, which remitted 70 percent of the cost of planting new areas with trees, exempted such lands from taxes, and permitted a 50 percent deduction for tax purposes from the profits generated from cutting the forests. The forestry policy of the military government was a major exception to its free-market approach and stimulated a significant expansion of forested land.
Chile's forested land is highly concentrated in the hands of a few major companies, principally those connected with the flourishing paper industry and with the national oil company. About 90 percent of all the wood harvested comes from plantations that were established, beginning in the early 1960s, on land of poor quality that originally had been cleared of forests for the growing of wheat and other crops. Reforestation, mostly with pine but also increasingly with eucalyptus, has continued at a faster pace than the cutting of the forests, thereby ensuring ample supplies for the foreseeable future (see table 28, Appendix). It was thought that the volume of production could double 1990 levels by the year 2000.
The public sector is playing a drastically smaller role in forestry. This diminution of the public sector's role is the result of the general tendency in the country toward reducing, and even eliminating, directly productive government activities. In 1992 the forestry industry was objecting strongly to the new powers that the Aylwin government was proposing to confer on the National Forestry Corporation (Corporación Nacional Forestal--Conaf) to protect native forests.
Whereas exports of basic--that is, nonmanufactured--forestry products had declined by the early 1990s, exports of manufactured wood products had almost doubled. This doubling of manufactured wood exports meant that instead of exporting raw logs, Chile was increasingly adding value to its forest products and was producing such items as milled boards, pulp, paper, and cardboard (see table 24, Appendix). The main market was Japan, which absorbed 25 percent of the value of exports, followed by the United States and Germany, with 8 percent each. Chile's print industry was enjoying a boom in the early 1990s, supplying books and magazines to neighboring countries, especially to Argentina (which accounted for 75 percent of overseas sales) and Brazil (12 percent). Exports of books and magazines grew by 90 percent in 1992 to about US$70 million.
Under study in 1992 was a bill to regulate Chile's shrinking but still large native old-growth forests, which totaled 7.62 million hectares out of 8.86 million hectares of woodland (the remaining 1.24 million hectares are plantations). Chile's forestry industry has worked mostly on plantations of radiata pine, the raw material used for making pulp. But the country's native forests are in need of management to avoid extinction or indiscriminate harvesting of slow-growing species and the resultant erosions and loss of land for future plantations of new species. During 1991, about 107,000 hectares were planted.
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Energy
Washington, 1988, 32; Carlos M. Bechelli and Roberto D. Brandt, "Six Latin American Countries Could Join in New Gas Market," Oil and Gas Journal, October 21, 1991, 46-52' and Economist Intelligence Unit, Country Report: Chile, [London], No. 4, 1993, 20.
Chile derives its energy mainly from petroleum and natural gas (60 percent), hydroelectric power (25 percent), and coal (15 percent). Unlike other countries in Latin America, Chile has been able to make effective plans for the development of the electricity sector. No bottlenecks are expected in this sector, and most analysts predict that it will continue to expand at a healthy pace. The country is endowed with ample hydroelectric resources and has an extensive electric net formed primarily by hydroelectric plants. For example, the Tocopilla station feeds electricity to the huge Chuquicamata and La Escondida copper mines, as well as to cities in northern Chile. An interesting feature of the system is that, although the central net is thoroughly interconnected, there are many individual producers. Since the late 1980s, there has been a marked increase in the importance of small ("other") producers (see table 29, Appendix).
As part of the final stages in the Pinochet regime's privatization process, beginning in 1985 the two large state-owned utilities, the National Electric Company (Empresa Nacional de Electricidad--ENDESA) and the Chilean Electric Company (Compañía Chilena de Electricidad--Chilectra), both Corfo subsidiaries, were privatized. Now the entire electricity sector basically is run by private companies. The government, however, established a supervisory system that ensures electricity companies a fair return. This keeps prices under reasonable control.
Domestic petroleum production has suffered a steady decline since 1982, from 2.48 million cubic meters to 1.38 million cubic meters in 1990, a reduction of 46 percent. In an environment of fast economic growth and rising demand for energy, this decline in production has translated into a much faster decline in the share of domestic production in total consumption. Although domestic production satisfied 35 percent of domestic consumption in 1986, in 1992 it met only 13 percent of Chile's needs. Consequently, Chile's oil import bill more than doubled between 1986 and 1990. The country's oil reserves, declining at a rate of 10 percent a year, stood at 300 million barrels in early 1992.
Petroleum exploration efforts have been unsuccessful since the 1970s. The National Petroleum Enterprise (Empresa Nacional de Petróleo--ENAP) has diversified its activities outside Chile with production contracts with Argentine, Brazilian, Colombian, and Ecuadorian companies. Exploration activities have increased in the Atacama Desert and the Strait of Magellan. In late 1992, ENAP began installing a US$18 million oil-drilling platform in Punta Arenas, the first of four that the company planned to operate in the Strait of Magellan in a joint venture with Argentina's state-owned oil company. About two-thirds of the crude oil produced in Chile came from offshore platforms in the Strait of Magellan. In 1991 domestic consumption was averaging 138,527 barrels per day (bpd) and was growing at a 5 percent annual rate.
Pipelines for crude oil products totaled about 775 kilometers in length; for refined petroleum products, about 785 kilometers; and for natural gas, about 320 kilometers. In mid-1992 Chile and Argentina agreed to build a 459-kilometer trans-Andean pipeline, designed to carry US$500 million in crude oil a year, or 94,000 bpd, from Neuquén, Argentina, and to help meet Chile's need for refined oil. Both countries also approved a US$1 billion project to build a 1,200-kilometer gas pipeline to feed Argentine natural gas to Santiago and other Chilean cities by 1997 (see fig. 9). In 1989 Chile's proven natural gas reserves totaled 46.1 billion cubic meters, of which 41.9 billion cubic meters were onshore and 4.2 billion cubic meters were offshore.
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Banking and Financial Services
By the end of the Allende period, commercial banks were little more than cash vaults. The availability of credit was low, and lending patterns were highly distorted. During 1975-90, however, Chile's financial sector experienced a remarkable boom, and by 1992 it was modern and dynamic. Banks performed a variety of operations, and the stock exchange was gaining rapidly in importance. The development in the 1980s of several financial operations involved with servicing Chile's external debt helped to increase the sophistication of the system.
The road to a modern financial sector was not easy. In the process, a number of banks collapsed as a result of the credit crisis of the early 1980s, and interest rates were high. After a period of government control, the failed banks were reprivatized in the mid-1980s, and the banking sector went through an extensive consolidation process. Some banks ceased to exist, and others sought mergers. In 1989 the government made the Central Bank independent of government control by creating the Central Bank Council, a five-member group consisting of two members appointed by the government, two by the opposition, and a president selected by consensus. Beginning in the late 1980s, the number of banks became more stable: thirteen domestic banks and twenty-two foreign-owned banks. Their level of operation had rapidly risen by the early 1990s. Nevertheless, Chile's top seven banks, squeezed by growing competition from consumer finance houses and in-store credit operations, suffered a 17 percent decline in profits in 1991. As a result, the banks were looking to the mining sector for profits.
Since the economic crisis of 1982-83, a recurrent preoccupation of policy makers has been the behavior of interest rates in Chile. Many analysts argued that the near collapse of the Pinochet regime's free-market experiment in those years was the consequence of extremely high interest rates. In 1991 and the first few months of 1992, interest rates experienced a major decline; this was the case for both nominal and real interest rates. As the degree of openness in the capital account increased, domestic interest rates seemed likely to converge toward international levels.
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Transportation
The heavy regulation of the transportation sector--including railroads, air transport, marine shipping, and buses--represented a tremendous barrier to international competitiveness. For all these means of transportation, reforms were enacted in the 1970s that were aimed at establishing a competitive environment and widening the participation of the private sector. Railroads were greatly affected by the imposition of self-financing discipline in the mid-1970s. With their infrastructure already failing, financial discipline forced further delays in maintenance programs. The growing demand for transportation services found a more dynamic response in the trucking industry, which developed as a more reliable and economic alternative and surpassed railroads in movement of freight.
Chile's internal transport network is basically well developed, although in need of considerable improvement. To that end, in late 1991 President Aylwin announced a US$2.4 billion public-sector investment program, designed to upgrade the neglected transport infrastructure. There are 7,766 kilometers of railroads (3,974 kilometers of 1,676-meter gauge, 150 kilometers of 1,435-meter standard gauge, and 3,642 kilometers of 1,000-meter gauge), fourfifths of which are state-owned (see fig. 10). In addition, there are 1,865 kilometers of 1,676-meter gauge and eighty kilometers of 1,000-meter gauge electrified. The privately owned segment, located mostly in the desert north, totals 2,130 kilometers. A total of 8,185 kilometers of track connect the northern terminal of Iquique to Puerto Montt in the south. That trunk line is being increasingly electrified. Feeder lines run westward to the ports and seaside resorts and eastward to mines and mountain resorts. Four international railroads run to northwestern Argentina and to Bolivia and Peru; two of these lines link Chile with Bolivia between Arica and La Paz (448 kilometers) and between Antofagasta and La Paz via Calama. Except for the international routes to La Paz, passenger service to the north of Santiago has been suspended. There is no passenger service on the Chile-Argentina line.
The government plans to refurbish and modernize the State Railroad Company (Empresa de Ferrocarriles del Estado). The Aylwin government was planning to invest US$98 million in infrastructure improvements in 1993 and was considering the creation of joint ventures with private companies to run the cargo transportation services. The Santiago metro is also to be expanded.
Roads are the principal means of moving people and freight. It was only in the 1960s that a paved road had been completed, linking the extreme north with Puerto Montt at the far southern tip of the Central Valley (Valle Central), and it was only in the mid-1970s that construction began on a north-south road from Puerto Montt into the extreme south. Transversal roads run east and west from the north-south highway. These include the northern Arica-Santos Highway to Bolivia and the southern Trans-Andean Highway between Valparaíso and Mendoza (Argentina).
Chile's road network totals approximately 79,025 kilometers that can be used year-round. Of the total network, 9,913 kilometers are paved, including the Pan American Highway (Longitudinal Highway), which extends, with the opening of the Southern Highway (Gran Carretera Austral) in 1989, about 4,700 kilometers to Puerto Yungay in the south. The highway is paved only to Puerto Montt. Chile has about 10,000 kilometers of paved road, with the region around Santiago and the Central Valley being the best served. Gravel roads total 33,140 kilometers, and improved and unimproved earth roads total 35,972 kilometers. There are about 1.1 million motorized vehicles of all kinds in Chile, including at least 700,000 automobiles and 300,000 trucks and buses. Chile's national bus service and Santiago's metro system are considered excellent. The 1991-94 program to improve the transportation infrastructure envisages construction of a new metro line in Santiago.
As befiting a country with such a long coastline, Chile has about eighteen ports, but the country has few good natural harbors. Only four or five ports have adequate facilities, and about ten are used primarily for coastal shipping. Shipping facilities are used to capacity, with a dozen companies engaged in coastal and international trade. Coastal shipping is restricted to Chilean flag vessels. The main ports are Antofagasta, Arica, Coquimbo, Iquique, Puerto Montt, Punta Arenas, San Antonio, Talcahuano, and, most important, Valparaíso. The state controls port organization and approximately 40 percent of the merchant marine, which had thirtyone ships totaling 756,000 deadweight tons in 1993. Chile's inland waterways are navigable for a total of only 725 kilometers, mainly in the southern lake district. The Río Calle Calle provides a waterway to Valdivia from at least one lake for ships up to 4,000 tons deadweight.
Linking the country's extremes, air transport has also become an important way of moving people and freight. Chile has 351 usable airports, forty-eight with paved runways, but none with runways longer than 3,659 meters. The international airport, in Santiago, is served by eighteen international airlines and two national ones. The state carrier, National Airline (Línea Aérea Nacional de Chile- -LAN-Chile), serves major cities in Chile and also carries passengers to other countries. Privatized in 1989, LAN-Chile merged with a new airline, Southeast Pacific, in 1992. LAN-Chile's domestic coverage is supplemented by the services of Chilean Airlines (Línea Aérea del Cobre--Ladeco), the airline of the state copper company (Ladeco is an acronym for copper airline) and Chile's second largest carrier. Ladeco has a 52 percent share of passengers, and LAN-Chile has a 46 percent share. LAN-Chile, however, controls 84 percent of the international movement of passengers, and Ladeco controls 16 percent. In 1992 Fast Air, Chile's largest air cargo carrier, incorporated the first of three DC-8 aircraft as part of a US$75 million service improvement program.
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Telecommunications
Chile's Ministry of Transportation and Telecommunications oversees the telecommunications sector. The development of this natural monopoly (telecommunications) is highly influenced by the type of regulations to which it is subjected. In the mid-1980s, Chile had an estimated deficit of 300,000 telephone lines. This deficit had accumulated through years of deficient management by the public sector. It was clear that major investments were needed and that the old regulatory framework was outmoded.
Reforms that directly affected telecommunications occurred in 1982 and 1985. Before the 1982 reform, Chile's telecommunications sector had been dominated by state-owned national companies. Santiago and the central part of the country had been served by the Telephone Company of Chile (Compañía de Teléfonos de Chile--CTC), a subsidiary of Corfo. The southern part of the country was served by two private companies, the National Telephone Company (Compañía Nacional de Teléfonos--CNT) and the Telephone Company of Coihaique (Compañía de Teléfonos de Coihaique). Another Corfo subsidiary, the National Telecommunications Enterprise (Empresa Nacional de Telecomunicaciones--Entel), had controlled Chile's international telephone service and much of the domestic long-distance service (including Easter Island).
Following key pricing reforms in 1987, most of the state-owned telecommunications firms were privatized during the 1987-89 period. The National Telephone Company of Spain (Telefónica) obtained control of CTC, which has been 50 percent privatized. Entel retained its monopolies. By 1991 Chile had 768,000 telephones. CTC plans called for installing 190,000 new lines in 1992 and investing US$500 million in 1993 in expanding and upgrading the telephone network. This would permit the installation of 280,000 new lines and the replacement of the remaining analog switching systems that were serving 320,000 lines in 1992. In April 1992, however, Chile's monopoly commission ordered Telefónica to sell its stake in one of the two Chilean telephone companies in which it owned shares--CTC and Entel. Telefónica was appealing the decision to the Supreme Court.
Chile's modern telephone system is based on extensive microwave relay facilities. The rapid development of cellular telephones, digital technology, and satellite links have put even the smallest town in Chile within reach. In 1992 telecommunications service increased 36 percent; CTC had installed more than 900,000 telephone lines by that year. In 1991 there were 4.25 million radios in the country (see The Media , ch. 4). The United States firm ScientificAtlantic , under contract to CTC, built a US$29 million domestic digital satellite communications receiving system. Chile was the first South American country to establish an emergency satellite rescue receiver station. A European Space Agency ERS-1 tracking and command station is located in Santiago.
Chile has 167 AM radio stations, no FM stations, 131 television stations, and 12 shortwave radio stations. Most of these units are affiliated with the Association of Chilean Broadcasters (Asociación de Radiodifusores de Chile--Archi). Chile uses two Atlantic Ocean stations and three domestic satellite ground stations of the International Telecommunications Satellite Organization ( Intelsat-- see Glossary).
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Tourism
Another area of significant new investment is tourism, which increased significantly during the 1980s, aided by government efforts to promote it both domestically and abroad through the National Tourism Service (Servicio Nacional de Turismo--Sernatur). More than 1.5 million tourists visited the country in 1992. Sernatur reported that during 1992 a total investment of US$320 million in hotel construction had either already been made or was under consideration in Viña del Mar, Santiago, Cuenca del Sol in Coquimbo Region and the ski resorts of La Parva and Valle Nevado. For the 1992-2007 period, more than US$2 billion is expected to be invested in tourism infrastructure projects in Chile.
One of the most important tourist destinations is Coquimbo Region, about forty-eight kilometers north of Santiago. The region is considered to have some of the best beaches and climatic and geographic conditions in Chile. A US$505 million project to develop 330 hectares with nine kilometers of beaches north of Coquimbo's capital, La Serena, was awarded competitively to a Spanish-Chilean consortium in 1992.
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Construction
The relative importance of the construction sector has declined significantly since the early 1970s. In 1970 the construction share of GDP was almost 8 percent, but by 1992 it had fallen to 6 percent. This trend is largely the result of a dramatic decline in the public sector's construction activities. Whereas in 1970 the public sector was responsible for over 30 percent of the total square meters constructed, in 1991 this portion had been reduced to 3.1 percent. This trend is partially reflected in a decline in the quality of the infrastructure. In order to maintain its pace of growth, Chile must reverse this trend.
The total construction area grew during the 1987-91 period at a healthy pace of 12.5 percent per annum. However, all of this increase is attributable to the private sector. During this period, the yearly area constructed by the public sector declined (see table 30, Appendix). The sector enjoyed a robust growth of 10 percent in 1992 as a result of an increase in housing starts and other construction projects.
A significant percentage of private-sector construction is financed by the government. In fact, one of the most important innovations of the military regime was that the state's role as direct producer was greatly reduced. Since the late 1970s, the overwhelming majority of public works have been executed by private-sector firms under government contract. A similar major structural reform has taken place in housing for people with low income. Although in the 1960s and early 1970s houses in this sector were constructed by government-owned firms, in the early 1990s they were being built by private firms and sold to people with low incomes through an elaborate subsidy system (see Housing Policies , ch. 2).
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INCOME, LABOR UNIONS, AND THE PENSIONS SYSTEM
The modernization of labor-market legislation during the late 1970s played a fundamental role in the subsequent performance of the Chilean economy. Included in this modernization were: reforms in the labor code that assign individual workers the right to seek representation in collective organizations, and a reduction in the cost of dismissals. Moreover, the financial reforms in social security and health care removed a major tax burden from the labor market, as it transformed social security and health care taxes into required basic health care programs. In addition, the reforms in the financing of education had a tremendous impact on the allocation of human resources and resulted in a significant growth of privately funded technical training programs (see Welfare Institutions and Social Programs , ch. 2). The financial aspects of these reforms directly affected the efficiency of the labor market. For example, pension funds became the largest institutional investors of the capital market, representing 26.5 percent of GDP in 1990 (see Economic Results of the Pensions Privatization , this ch.).
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Employment and Unemployment
According to the 1992 census, the Chilean population totaled 13,348,401 million in that year. The average annual rate of population growth in the 1982-92 period was 1.6 percent, a relatively low rate in the context of Latin America. Chile and Argentina are the two countries with the lowest rates of population growth in South America (see Current Demographic Profile , ch. 2).
Chile is a highly urbanized country. According to estimates for 1991, about 85 percent of the population resides in urban areas. A large fraction of the population is in the metropolitan area, which includes the capital city, Santiago. The population share of this region was estimated at slightly more than 39 percent in 1992, which is one percentage point higher than the 1982 share. These figures indicate that the relative growth of the metropolitan area has slowed down compared with the 1970-80 decade, when the ratio climbed to 38.1 percent in 1982 from 35.4 percent in 1970 (see Urban Areas , ch. 2).
With a lower rate of population growth, Chile's "working-age" population, which includes all those individuals above fifteen and below sixty-five years of age, represented 64 percent of the total population in 1992. The labor force participation rate, or the ratio of those in the labor force over the "working-age" population, was 52.6 percent in March 1992. Thus, 36.8 percent of the total population was working or seeking a job (see table 7, Appendix). The rate of unemployment has declined steadily throughout the period (see table 8, Appendix). The overall rate of growth in employment for the 1987-91 period was about 3 percent per year. The rate was substantially higher from 1987 to 1989 (5 percent), the period of fast recovery after the debt crisis. It is possible that the uncertainty regarding the final reforms on the labor legislation might have delayed employment creation, but there were other important factors, such as an increase in the interest rate. The most dynamic sectors during the 1987-89 period were construction and industry, with average rates of employment growth of 20 percent and 11 percent per year, respectively.
After years of high unemployment, in the 1990s the trend began to change. By late 1993 the rate of unemployment had plunged to 4.9 percent, a rate significantly lower that that of the rest of Latin America, and one of the lowest in Chile's modern history. Interestingly, this drastic reduction in unemployment has taken place at the same time as real wages have increased significantly. The United Nations Economic Commission for Latin America has estimated that average real wages increased by 13.7 percent between 1990 and 1993. This change in employment conditions has been the direct result of the emphasis that Chile's economic model has placed on the development of employment-intensive industries. The increase in employment has been so impressive that a number of analysts have argued that Chile may be running into a period of labor shortages (see The Labor Force and Income Levels , ch. 2).
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Income Distribution and Social Programs
Latin America has traditionally had one the most unequal income distributions in the world. Chile has not been an exception to this rule. Although data are scarce, existing evidence suggests that during the years of military rule income inequality increased significantly in Chile. It has been estimated that in 1985 about 25 percent of households lived in extreme poverty (see Glossary), and that 45 percent of households lived below the poverty line. During the 1990-93 period, the incidence of poverty declined substantially. In late 1993, the Ministry of Planning and Cooperation estimated that between 1990 and 1993 more than 1.3 million people moved out of poverty. This was the result of a combination of factors: the rapid rate of growth experienced by the economy; and the implementation of social programs aimed at to the poorest groups in society.
The emphasis on social programs aimed at certain groups began in the mid-1970s. This approach seeks to deliver social programs directly to the poor, avoiding leakages to middle- and upper-income groups. These programs have been largely successful. It has been reported, for example, that 90 percent of the food distributed through the preschool nutritional programs went to the poorest three deciles of the population in the mid-1980s. Moreover, more than 80 percent of the food has reached the rural poor. Since the basic housing program was reformed in the early 1980s, more than 50 percent of the subsidies have been reaching the poorest three deciles of the population. In 1969, before the system was reformed, only 20 percent of subsidies were received by the poorest 30 percent of the population.
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Unions and Labor Conflicts
After reluctantly accepting the Labor Plan of 1979, unions became active again in the early 1980s and were able to push for wage concessions during the economic boom of that period. A minority maintained a tough stance in opposition to the new system, but they lacked significant influence, so opposition eventually disappeared.
The most radical change experienced by the union movement with the return to democracy has been its reintegration into the national discussion of labor reforms and social policies. The reforms of 1990-91, which introduced some changes to the original Labor Plan, represented a moderate increase in workers' bargaining power in each of the three central areas of the labor law: dismissals; the right to collective bargaining; and the right of employers to hire temporary replacements or to impose lockouts during strikes.
Law 19,010, enacted in 1990, regulates individual contracts. In the area of dismissals, it introduces two important differences relative to the previous law--the size of the severance compensation and the right of the worker to appeal. Whereas the Labor Plan had introduced the practice of dismissals without cause and established a severance pay equal to one month's salary per year of service up to a maximum of five months' worth, this reform reinstates the principle of dismissal only with cause, and it increases the severance-pay ceiling to eleven months. The law considers two possible reasons for dismissal--the traditional "just cause" (serious misconduct) and the new "economic cause." If the employee appeals and the employer fails to prove "just cause," the employer would have to pay a 50 percent penalty in addition to the usual severance. Failure to prove "economic cause" would result in a 20 percent penalty.
The previous law was also modified to provide an option to replace the normal severance with a "payment in all separations." This option is available to workers with more than seven years of service with the same employer. If this option is exercised, the employer would establish a fund in the worker's name, with monthly deposits of a minimum of 4.1 percent and a maximum of 8.3 percent of the salary (the salary base having a maximum) in a private financial institution. These contributions and the corresponding accumulated interest would be nontaxable income and would constitute a fund that would be withdrawn on separation.
Law 19,069, enacted in 1991, regulates the rights of employers and employees during collective bargaining. Under this law, enterprise-level workers' organizations have the right to negotiate with employers, and employers are obliged to negotiate with them. The law gives the employer the right to limit to thirty-five days the period of bargaining with all unions representing the enterprises' workers. Under Law 19,069, collective agreements can establish pay scales, indexation formulas, fringe benefits, and the like, but they cannot limit the sovereignty of the employer over the organization and administration of the enterprise (Article 82).
One of the important departures from the previous law is that trade unions or workers' associations are given the right to bargain with more than one employer. Yet this right can only be exercised under the following circumstances: in the case of collective bargaining affecting more than one enterprise, prior agreement of the parties is required (Article 79); submission of collective agreement by other trade union organizations (such as federations or confederations) requires approval by secret ballot of the absolute majority of the member workers of the enterprise (Article 110); and a given worker cannot be covered by more than one collective agreement (Article 83).
A strike would suspend the individual contract, give employers a conditional right to temporary replacement, and give employees a conditional right to renounce union membership and return to work. Employers can use temporary replacements from the first day of the strike if their last offer, before the strike was declared, was equivalent to the previous contract adjusted by the consumer price index ( CPI--see Glossary). If the last offer was lower, employers cannot use temporary replacements within a minimum of thirty days after the strike is called. Employees have the right to renounce union membership and go back to work fifteen days after calling the strike, as long as the outstanding offer of the employer is equivalent to the last contract adjusted by the CPI. If the last offer is lower, employees must delay their walkout a minimum of thirty days after the strike is called. The law does not establish a maximum duration for strikes, but if more than half of the workers return to work, the strike must end. At that point, all workers must return to the job. In order to make use of the right to replace workers temporarily, employers must make an offer that at least adjusts wages by past inflation. If the employer also offers other fringe benefits but workers still go on strike, the employer may hire temporary replacements. However, the employer loses that right if the wage adjustment for past inflation is given but some fringe benefits are cut. That would not be a contract equivalent to the previous one adjusted by inflation. If workers go on strike, the employer cannot use temporary replacements within thirty days of the declaration of the strike.
It was unclear in 1992 what the final form would be for the new legislation on labor-management relations, labor productivity, investment, on-the-job training, and other aspects of labor markets' performance. However, workers have almost doubled their participation in labor unions since 1983, and by 1990 about 13 percent of those employed were affiliated with unions. During 1990, 25,000 workers, out of 184,000 who participated in collective contracts, used strikes as a means of pressing their demands. Most strikes during 1990 and 1991 were of short duration (see Labor , ch. 4).
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Economic Results of the Pensions Privatization
Chile's pensions system, which started to operate in May 1981, is based on individual capitalization of funds (see Social Security , ch. 2). This system determines a minimum basic contribution equal to 10 percent of disposable income and makes the benefit a function of an individual's contributions during his or her active life. Benefits for incapacity and survival are financed by complementary insurance with financial reserves. Decree Law 3,500 of 1981 institutes a social security system that make contributions obligatory for dependent workers who joined the labor force after December 31, 1982, and makes them voluntary for independent workers and those who had already contributed to the traditional pension funds. The old pay-as-you-go system, which was being phased out, covered all those workers who had entered the labor force in 1982 or earlier and who chose not to transfer to the new capitalization system. The reform responds to a need that has been recognized before, when the old system had entered a phase of serious financial difficulties.
In the reformed system, the state now plays a fundamental role in regulating and monitoring operations and guaranteeing "solidarity in the base" through a minimum pension. All workers, after contributing a minimum amount (15 percent of their gross income annually), have the right to a minimum pension of 85 percent of their minimum salary, even if their life-time contributions to the system result in a smaller benefit. The new system brought about an increase in coverage, with the proportion of independent workers covered increasing from 58 percent in 1985 to 79 percent in 1990. The proportion of dependent workers covered increased from 79 percent in 1985 to 92 percent in 1990.
Article 28 of Decree Law 3,500 establishes that the numerous Pension Fund Administrators (Administradoras de Fondos de Pensiones--AFPs) are authorized to charge a fee to cover their administrative costs. The most important restriction is that, with a few exceptions, fees have to be the same for all affiliates in a given AFP. After a relative increase in the fees between 1981 and 1983, competition resulted in a steady decline in the cost to individuals. In 1990 the cost for an "average contributor" was 33 percent lower in real terms than in December 1983. Commissions fell from 5 percent of taxable income in 1985 to about 3.2 percent in 1990. In 1992 the AFPs were charging about 0.9 percent of salary in insurance premiums and 1.8 percent in commissions, for a total of 2.7 percent.
Strict norms regulate the investment of pension funds. Only certain instruments may be used, and there are clear limits on the distribution of investments by type of instrument. The dynamism of the Chilean capital market since the early 1980s has forced constant revisions of these norms. Pension funds are the largest institutional investors in the capital market, representing 26.5 percent of GDP in 1990 (compared with 0.9 percent in 1981). The average real return to investment of Chilean pension funds between 1981 and 1990 was 13 percent. In 1992 AFPs were authorized to invest up to 3 percent of their portfolios abroad, double the previous maximum.
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MACROECONOMIC POLICY, INFLATION, AND THE BALANCE OF PAYMENTS
The Central Bank and Monetary Policy
One of the key lessons of the Chilean reforms is the importance of macroeconomic equilibrium in providing the "right" environment conducive to economic growth and stability. For all practical purposes, by 1988-89 macroeconomic equilibrium had been achieved in Chile.
One of the problems that occupied many scholars and politicians in the late 1980s was how to guarantee the continuity of macroeconomic policy after the military regime. The key issue was how to ensure that macroeconomic decisions, and in particular monetary and exchange-rate policies, would not be determined by partisan politicians with a short-term mentality. In short, a crucial point in the transition's debate was how to remove Central Bank decisions from the day-to-day urgencies of politics. This issue was seen as particularly important by those economists who argued that the politically inspired management of monetary policy was at the root of Chile's long history of inflation.
After much debate, the Pinochet government decided, in 1989, to implement a new law that would greatly enhance the independence of the Central Bank. The law made the bank autonomous and legally removed it from the area of influence of the minister of finance. According to the new legislation, the bank was to be governed by a five-member board, the Central Bank Council. Each member was to serve for ten years and could only be removed under a strict set of circumstances. The president of the republic was required to obtain Senate approval to name new members of the board.
When the new legislative project on Central Bank reform was announced in mid-1989, the members of the opposition denounced it as an attempt by the Pinochet regime to perpetuate itself in power. However, after some internal debate within the CPD coalition, the opposition forces decided to support the project, as long as the members of the initial board were considered unbiased technocrats. After a long process of negotiation at the highest level, it was decided that the first five members would serve for two, four, six, eight, and ten years, respectively; two of them were chosen by the opposition, two were chosen by the departing Pinochet government, and the chairperson of the board was chosen by consensus. It was also decided that the chairperson would serve for two years. In 1992 the chairperson's two years were up, and a new member of the board was chosen as chairperson, this time for ten years. On that occasion, the idea of an independent Central Bank was put into effect.
In 1991-92 the Central Bank focused on two issues: the desire to reduce the rate of inflation from double digits to single digits; and the exchange-rate policy of trying to balance the need for continuous promotion of exports with the reduction of inflation. To address these issues, the Central Bank used a number of means, including the auctioning of Central Bank bills and the acquisition of international securities. Also, the bank introduced a series of amendments to exchange-rate policy.
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Exchange-Rate Policy and the Balance of Payments
There was broad agreement that the implementation of an exchange-rate policy aimed at encouraging exports had been at the center of Chile's economic success. Since at least 1985, the members of the Chilean economic team had understood that avoiding exchange-rate overvaluation was crucial to the promotion of growth and prosperity. As a result, it was decided that a policy based on small daily adjustments of the nominal exchange rate would be adopted. In this way, exporters would be compensated for any increase in their domestic costs stemming from inflation.
Although the basic elements of this "crawling peg" exchangerate policy were maintained during the 1985-92 period, the system went through a number of changes. The first important innovation was to center the "reference" exchange rate set by the Central Bank within a 6 percent band. Market participants were allowed to transact freely within the band. A second important change was to widen the band to 10 percent and to adjust the reference rate downward. Finally, in 1992 the Central Bank decided to alter the method used to calculate the daily adjustment of the reference rate by using a basket of currencies made up of the dollar, the German mark, and the Japanese yen in a 50-30-20 ratio, instead of only the dollar.
In early 1990, Chile started to receive increasing amounts of foreign financial flows. This generated an overabundance of foreign exchange, which tended to make the exchange rate appreciate. From a practical point of view, the increased capital inflows were reflected in the fact that the exchange rate moved to the "floor" of the band, reducing the amount of real Chilean pesos that each exporter received per United States dollar exported. This development affected the profitability of a number of export projects, reducing the overall competitiveness of the Chilean economy. Also, the real appreciation of the exchange rate affected local industries that competed with imported goods, including the agricultural sector. Not too surprisingly, exporters have tried to persuade the government to alter its exchange-rate policy in a way that would increase their profits.
In 1991 the pressure of capital inflows subsided somewhat. However, this did not end the overabundance of foreign exchange, nor did it put an end to the tendency toward real exchange-rate appreciation. That year the current account of the balance of payments experienced a remarkable turnaround of almost US$1 billion (see table 31, Appendix). Consequently, during 1991 the overall result was that external accounts were once again positive, with the Central Bank accumulating more than US$1.2 billion, as compared with US$2.4 billion in 1990.
Chilean balance of payments trends for 1990-92 generally were positive, despite a current account deficit in 1992-93. Although the capital account experienced a reversal in 1991, moving from a large surplus in 1990 to a modest deficit, in 1992 this tendency appeared to be reversing itself once again, with capital inflows exceeding outflows. An important aspect of the balance of payments data for the early 1990s is the large positive figure for "errors and omissions," which was US$161 million in 1991. However, there is evidence suggesting that the government's figure represents "reversed capital flight" entering the country in an illegal fashion. Some observers have claimed that illegal drug-related monies were moving toward Chile in the early 1990s (see Incidence of Crime , ch. 5).
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Trade Policy and Export Performance
A fundamental element of the Aylwin government's economic program was the maintenance of Pinochet's foreign-trade policy. Early on, the forces of the CPD coalition pointed out that an open external sector was a fundamental component of their economic package. One of the early decisions of the Aylwin government was to open the Chilean economy further to international competition. This was done by reducing import tariffs from 15 percent to 11 percent, except for expensive luxury goods or commodities governed by a price band.
Data on exports for the 1989-91 period reveal three telling developments. First, the share of traditional mining exports showed a clear downward trend. Second, there was a significant increase in the shares of the agricultural and manufacturing sectors. (In 1991 fruits and forest products constituted 85 percent of total exports, and the agricultural sector accounted for about US$1.2 billion, or about 14 percent of total exports.) Third, an increasing proportion of manufacturing exports were going to industrial countries (see table 32, Appendix).
Exports in 1991 showed a noteworthy increase in shipments toward other Latin American countries. Chile signed a trade accord with Argentina and in 1992 was working on a trade accord with Venezuela and Colombia. In 1991 Chile signed a bilateral free-trade agreement with Mexico, under which each country would gradually reduce tariffs on three categories of products. The Chile-Mexico bilateral accord, which took effect on January 1, 1993, called for the removal of tariffs on almost all of Chile's trade with Mexico by about 1996. Chile was hesitant in the early 1990s to join the other countries in South America in participating in regional trading agreements, such as the Southern Cone Common Market (Mercaddo Común del Cono Sur-- Mercosur; see Glossary), or the renewed Andean Group (see Glossary). By early 1994, however, Chile was ready to join Mercosur and was expected to become a member in January 1985.
Chile's exports were also moving rapidly beyond the scope of Latin America. An important goal in the area of trade diplomacy was a free-trade agreement with the United States. On October 1, 1990, Chile and the United States signed a framework agreement on trade and investment aimed at negotiation of a proposed Chile-United States free-trade accord similar to the North American Free Trade Agreement ( NAFTA; see Glossary) among the United States, Mexico, and Canada. The United States remained Chile's most important trade partner, although in 1991 the value of Chilean exports to Japan surpassed the value of exports to the United States by US$10 million, and in 1992 the figure rose to at least US$52 million. Japan accounted for US$900 million of Chile's US$1.5 billion surplus in 1991.
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THE FUTURE OF THE ECONOMY
In early 1994, the Chilean economy stood as one of the strongest in Latin America. Moreover, President-elect Eduardo Frei Ruiz-Tagle had stated that his administration would continue the export-oriented, market-based policies of Aylwin and Pinochet. Frei's minister-designate of finance, Harvard-educated Eduardo Aniniat Ureta, publicly endorsed the main aspects of the current economic model. However, the trend in the early 1990s toward real exchange-rate appreciation clouded the future of the export sector.
There are still, however, some areas of concern. Most of the growth in Chile in the early 1990s was the result of a combination of increased capacity utilization and improvements in productivity. The contribution of capital accumulation to growth has remained relatively low. Despite increases, in 1992 total capital investment barely surpassed 20 percent of GDP. Historical data from other parts of the world are emphatic in indicating that high rates of capital formation (see Glossary) are required to sustain growth in the longer run. Data for 1993 suggest that there has been a remarkable increase in savings (see table 33, Appendix). In the years to come, it will be fundamentally important to maintain (or even to increase) the savings effort.
A second and related area of concern has to do with infrastructure. Although in the case of Chile the situation is not as dire as in other Latin American countries, Chile needs to continue to maintain and improve its infrastructure. With the already active participation of the private sector in important projects, the selective participation of the government as the main entrepreneur is clearly needed.
A third concern is the environment, where two problems are particularly acute. The first one is air pollution in Santiago. The Aylwin government decided to address this issue in a rather gradual way. Whether this is the most effective and efficient approach is unclear. The second serious problem is ocean pollution, especially in the more densely populated coastal areas.
An important fourth area to focus on in the future is the battle against poverty. President-elect Frei stated that this would indeed be a priority for his administration. The appointment of Carlos Massad Adub, a well-respected, University of Chicago-trained economist, to the Ministry of Health indeed suggests a high commitment to social services. In that regard, an increase in the aggressiveness of targeted social programs seemed to be the most promising avenue. An important question, however, is where to obtain the resources. This is not easy to answer, but creative solutions, including a possible reduction in the military budget in the years to come, are among those that might be contemplated.
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A number of fine sources provide information on the recent transformation and performance of the country's economy. These include Jere Behrman's Foreign Exchange Regimes and Economic Development: Chile, Vittorio Corbo's Inflation in Developing Countries, Ricardo Ffrench-Davis's Políticas económicas en Chile, 1952-1970, Markos J. Mamalakis's Historical Statistics of Chile, and Gonzalo Martners El pensamiento económico del gobierno de Allende.
The literature on the economic reforms of the mid-1970s and 1980s is extensive. Comprehensive studies include Una década de cambios económicos: La experiencia chilena 1973-1983 by Alvaro Bardón, Camilo Carrasco M., and Alvaro Vial G.; Monetarism and Liberalization, by Sebastian Edwards and Alejandra Cox Edwards; and The National Economic Policies of Chile, edited by Gary M. Walton. Tarsicio Castañeda's Combating Poverty provides a first-rate analysis of Chile's highly praised approach to social programs. In La revolución laboral en Chile and El cascabel al gato, José Piñera Echenique offers an insider's account of two of the most important and politically difficult reforms in the Chilean social and economic system: the labor decrees and the social security system.
Much of the literature on the Chilean economy appears in article form in scholarly and professional journals or in edited volumes. In Chile three journals are particularly important. One is Colección de Estudios de CIEPLAN, published by a Christian Democratic-leaning think tank, the Corporation for Latin American Economic Research (Corporación de Investigaciones Económicas Para Américal Latina--Cieplan). Early issues of this journal examine the economic thinking of many of the Aylwin government's economic officials. Other issues contain some of the more severe criticisms of the Pinochet economic policy. Cuadernos de Economía, published by the Catholic University of Chile, provides somewhat technical pieces on the evolution of the Chilean economy. Most of these are written by economists who sympathized with the Pinochet regime. A number of important pieces on the evolution of the Chilean economy have only appeared in the form of working papers. Although it has been sometimes difficult to gain access to these documents, a list of the most important can be found in the Bibliography. Estudios Públicos, published by the Centro de Estudios Públicos, is a multidisciplinary journal devoted to public policy. It has published important debates, with different positions being duly represented.
Current data on monetary variables, balance of payments, national accounts, and employment have been published periodically by the Central Bank. The National Statistics Institute (Instituto Nacional de Estadísticas--INE) is a major source of basic information. The United Nations Economic Commission for Latin America and the Caribbean, with offices in Santiago, also is a valuable source of economic and social data for Chile and all other Latin American countries. (For further information and complete citations, see Bibliography.)
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Chapter 4. Government and Politics
WITH THE REESTABLISHMENT of democratic government in March 1990, Chile was once again thrust into the international limelight. In the early 1970s, the long, narrow country on the west coast of South America had drawn widespread attention by electing a Marxist president, Salvador Allende Gossens (1970-73), who was intent on forging a new path to socialism. Following Allende's overthrow on September 11, 1973, Chile under military rule became notorious for some of the worst excesses of modern-day authoritarianism.
Headed by General of the Army Augusto Pinochet Ugarte (1973- 90), the dictatorship was widely reviled for ending Chile's tradition of democratic politics and committing numerous violations of human rights. Although isolated politically, Chile's military government earned international acclaim for far-reaching economic and social reforms that transformed the country's state-oriented economy into one of the most open economic systems in the developing world. The economic reforms of the late 1970s and 1980s set the foundation for extraordinary investment and growth in the early 1990s. Economic progress, combined with the return of democratic politics largely devoid of the confrontation and polarization of the past, positioned Chile to enter the twentyfirst century with increased prosperity in a climate of peace and freedom.
Chile's favorable situation developed because the military government's success at implementing an economic revolution was not duplicated in the political arena. From the outset, Pinochet and his colleagues had sought to displace the parties, politicians, and institutions of the past so that they might create a nation of pliant and patriotic citizens, devoted to their private pursuits under the tutelage of a strong and benevolent state with merely a façade of representative government.
However, the military commanders badly underestimated the strength of the nation's traditional political parties and failed to understand the degree to which democratic practices and institutions had become a fundamental part of Chile's national character. Indeed, Pinochet was forced to abandon his plan for virtual life-long rule after a humiliating personal defeat in a 1988 plebiscite (see Glossary) at the hands of the very civilian leaders whom he had reviled and persecuted. Their resilience made possible the transition to democracy in March 1990 and the success of Chile's first civilian government after seventeen years of authoritarian rule.
Chile's transition back to democracy encountered serious challenges. Although opposition groups had vehemently rejected the Pinochet government's constitution of 1980 as illegitimate and undemocratic, they were forced to accept the political rules and playing field as defined by the military government in order to challenge its very authority. To a greater degree than most other transitions to democracy in Latin America, Chile's was accomplished within the framework of an institutional order conceived by an authoritarian regime, one that continued to define the political game long after the return to representative government. Pinochet was unable to destroy his adversaries or project his own presidential leadership into the future, but he succeeded in imposing an institutional legacy that Chile's civilian elites would have to modify substantially if Chile were to become fully democratic.
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CONSTITUTIONAL HISTORY
Development and Breakdown of Democracy, 1830-1973
Following the wars of independence and several failed experiments in institution building, Chile after 1830 made steady progress toward the construction of representative institutions, showing a constancy almost without parallel in South American political history. From 1830 until 1973, almost all of Chile's presidents stepped down at the end of their prescribed terms in office to make way for constitutionally designated successors. The only exceptions to this pattern occurred in 1891, after a brief civil war; in the turbulence from late 1924 to 1927, which followed the military's intervention against the populist President Arturo Alessandri Palma (1920-24, 1925, 1932-38); in 1931, when several chief executives resigned under pressure and military officers intervened directly in politics; and in 1932, when the commander of the Air Force of Chile (Fuerza Aérea de Chile--FACh), Marmaduke Grove Vallejo, proclaimed his short-lived Socialist Republic. For most of its history, Chile was governed by two charters--the constitution of 1833 and the constitution of 1925, which drew heavily on its nineteenth-century predecessor.
Under the 1833 document, Chilean presidents, notably Manuel Bulnes Prieto (1841-51) and Manuel Montt Torres (1851-61), presided over the gradual institutionalization of representative practices and a gradual expansion of suffrage, while exercising strong executive authority. By the 1870s, the president was being challenged by increasingly cohesive political parties, which, from their vantage point in the National Congress (Congreso Nacional; hereafter, Congress), sought to limit executive prerogatives and curb presidential intervention in the electoral process.
With the assertion of congressional power, presidents were limited to one term, and their control over elections was circumscribed. However, it took the Civil War of 1891 to bring to an end the chief executive's power to manipulate the electoral process to his advantage. The victory of the congressional forces in that conflict inaugurated a long period in which Congress was at the center of national politics. From 1891 until 1924, presidents were required to structure their cabinets to reflect changing legislative majorities, and the locus of policy making was subject to the intrigues and vote trading of the legislature.
Although politics during the parliamentary period was often chaotic and corrupt, Chile enjoyed unusual prosperity based on a booming nitrate trade and relatively enlightened leadership. Political parties, whose activities had once been limi |
