Chile operates as a parliamentary republic, protecting the interests of the ruling oligarchy. Congress, dominated by landed elites, exerts authority over the president's Cabinet appointees. A high volume of nitrate exports fuels a strong economy, which in turn spurs industrialization and massive urbanization.
World War I causes a dip in international commerce and deeply affects the economy. Germany develops artificial nitrates, and copper becomes Chile's leading export. Inflation spirals. A growing labor movement demands better treatment. A worker-supported Democratic Party emerges and spawns two extreme left offshoots. The urban middle classes and provincial elites rally behind a Radical Party.
Military intervention puts reformist Colonel Ibáñez in the presidency. Borrowing from private foreign lenders and increased revenues from copper exports finance import substitution. Depression-era economic disaster reinforces protectionist policies, which, along with oppressive rule, spark popular protests. Ibáñez resigns in 1932; reformist Arturo Alessandri, president before Ibáñez, is reelected.
Alessandri enacts a new labor code and the 1925 constitution, which codifies separation of church and state and increases the directly elected president's powers. Promotion of industry and public works cuts unemployment, but opposition denounces Alessandri for scant economic nationalism and attention to workers' needs. The Popular Front, a democratic-leftist coalition, wins the '38 election.
President Pedro Aguirre Cerda works with the private sector to build a mixed economy. Social reforms are limited in favor of national industrial development. Large landowners control the countryside and restrict rural unionization. Political infighting erodes the Popular Front. Right-wing parties grow stronger. Conservative Radical Juan Antonio Ríos Morales is elected president.
President Ríos creates state enterprises in heavy industry. The war boosts Chile's mineral exports. Chile severs ties with the Axis powers to cement relations with the U.S. Fellow Radical Alfredo Duhalde Vásquez replaces an ill Ríos as interim president. His anti-labor policies displease the Communist Party (PCCh) and some Radicals. Left-wing Radical Gabriel González Videla wins the '46 election.
In a controversial about-face, Videla's government outlaws the PCCh and severs relations with the Soviet Union. Chilean workers demand reforms in light of chronic inflation, rising unemployment, and declining real income. Political parties are polarized. Hoping to see their party re-legalized, many Communists join Socialists in backing former President Ibáñez, who wins the 1952 election.
Nationalist reforms give way to an unsuccessful conservative program to stem inflation. Growth and investment slow. Ibáñez loses support. The re-legalized PCCh forms an alliance with the Socialists. A new, centrist, Christian Democratic Party emerges. On the right, Conservatives and Liberals unite behind Jorge Alessandri, who wins the 1958 election over independent Marxist Salvador Allende.
Under President Alessandri, the economy grows, unemployment shrinks, and foreign debt finances public spending. Alessandri's policy of capping wages incites labor protests. Peasants, the urban poor, and the middle class support center candidate Eduardo Frei Montalva. Seeking to avoid an Allende victory, the Right backs Frei, who wins the 1964 election.
The government takes 51 percent ownership of U.S.-controlled Chilean mines. Returns from copper production rise. Chile joins regional economic and trade groups. Frei improves income distribution, but economic growth remains slow and inflation high. A leftist coalition, critical of Frei for being too conservative, sees its presidential candidate, Salvador Allende, narrowly defeat Frei in 1970.
Industrial-sector capacity limits hamper the import substitution policy and contribute to an economic downturn. Inequality and discontent rise. Socialists and Communists disagree on the pace of transition to socialism, while a center-right coalition denounces Allende's administration as illegitimate. General Pinochet leads a violent military coup and government takeover.
Imposing a state of siege, Pinochet rules by decree. Political parties are outlawed; leftists are targeted as "domestic enemies." Violence and "disappearances" are frequent. When Pinochet's attempts at economic restructuring fail, the "Chicago Boy" economists advocate a drastic free-market approach. The government slashes welfare programs, liberalizes trade, and deregulates the financial sector.
The government evolves into a one-man dictatorship after Pinochet makes himself commander-in-chief of the military. He allows the Chicago Boys to oversee an economic "shock treatment." The government borrows heavily from abroad as the economy takes off. Chile enjoys an economic "miracle" in an atmosphere of political repression.
A new constitution allows Pinochet to remain in power another eight years. Trade and financial liberalization accelerate, but massive debt accumulation, bad domestic loans, and an overvalued peso spell the end of the economic miracle.
Pinochet begins his second term amid economic collapse. An international debt crisis and a global decrease in credit combine with domestic conditions to put the economy in recession. Unemployment soars, as does the number of Chileans living in poverty.
A macroeconomic program devised with help from international financial institutions puts Chile's economy back on its feet. Exports fuel economic growth, while privatization and debt conversion programs allow Chile to retire half of its debt. Wages remain low and worker discontent high. Under pressure from Europe and the U.S., Pinochet re-legalizes political activity, sealing his fate as dictator.
A plebiscite vote removes Pinochet from power and elections replace him with Christian Democrat Patricio Aylwin of the "alliance for democracy" (Concertación). President Aylwin begins the long transition to democracy, addressing human rights violations and promoting social and labor reform. An export boom leads to record GDP growth and allows a redistributive social policy.
President Eduardo Frei Ruiz-Tagle (son of former President Frei) of the Concertación party continues Aylwin's economic and social policies. Pinochet is arrested in London and charged with human rights violations. The global financial crisis of 1998 strongly affects Chile's export-dependent economy. Budget constraints slow social spending. Income inequality rises again.
Chile elects a third consecutive Concertación president, Ricardo Lagos, by a slim margin in a runoff election. The country regains its economic footing and maintains stability through the global slowdown, but unemployment remains high. Inequalities polarize the population, but political life remains stable. Pinochet is stripped of his immunity but is eventually deemed unfit for trial.
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