Republic of Chile
Area: 756,945 sq. km. (302,778 sq. mi.); nearly twice the size of California.
Cities: Capital--Santiago (metropolitan area est. 6 million). Other cities--Concepcion-Talcahuano (840,000), Vina del Mar-Valparaiso (800,000), Antofagasta (245,000), Temuco (230,000).
Terrain: Desert in north; fertile central valley; volcanoes and lakes toward the south, giving way to rugged and complex coastline; Andes Mountains on the eastern border.
Climate: Arid in north, Mediterranean in the central portion, cool and damp in south.
Nationality: Noun and adjective--Chilean(s).
Population (2002): 15.1 million.
Annual population growth rate: 1.2%.
Ethnic groups: Spanish-Native-American (mestizo), European, Native-American.
Religions: Roman Catholic 69.9%; Protestant 15%.
Education: Years compulsory--12. Attendance--3 million. Adult literacy rate--95.8%.
Health: Infant mortality rate--8.9/1,000. Life expectancy--79 yrs.
Work force (5.9 million): Community, social and individual services--27%; industry and commerce--22%; agriculture, forestry, and fishing--13%; construction--8%; financial services--8%; transportation and communication--8%; electricity, gas and water--1%; mining--1%.
Independence: September 18, 1810.
Constitution: Promulgated September 11, 1980; effective March 11, 1981; amended in 1989, 1993, and 1997.
Branches: Executive--president. Legislative--bicameral legislature. Judicial--Constitutional Tribunal, Supreme Court, court of appeals, military courts.
Administrative subdivisions: 12 numbered regions, plus Santiago metropolitan region, administered by appointed "intendentes," regions are divided into provinces, administered by appointed governors; provinces are divided into municipalities administered by elected mayors.
Political parties: Major parties are the Christian Democrat Party, the National Renewal Party, the Party for Democracy, the Socialist Party, the Independent Democratic Union, and the Radical Social Democratic Party. The Communist Party has not won a congressional seat in the last four elections.
Suffrage: Universal at 18, including foreigners legally resident for more than 5 years.
GDP: $67.7 billion.
Annual real growth rate: 1.9%.
Per capita GDP: $4,200.
Forestry, agriculture, and fisheries (7% of GDP): Products--wheat, potatoes, corn, sugar beets, onions, beans, fruits, livestock, fish.
Commerce (11.6% of GDP): Sales, restaurants, hotels.
Manufacturing (17.4% of GDP): Types--mineral refining, metal manufacturing, food processing, fish processing, paper and wood products, finished textiles.
Financial services (13.4% of GDP): Insurance, leasing, consulting.
Mining (8.6% of GDP): Copper, iron ore, nitrates, precious metals, and molybdenum.
Trade: Exports--$18.5 billion: copper, fishmeal, fruits, wood products, paper products, fish, wine. Major markets--U.S. 20.7%, EU 24%, Japan 11%, Brazil 3.5%. Imports--$15.8 billion: petroleum, chemical products, capital goods, vehicles, electronic equipment, consumer durables, machinery. Major suppliers--EU 19.1%, Argentina 19%, U.S. 16%, Brazil 8.6%, China 6.7%, Japan 3.4 %.
The northern Chilean desert contains great mineral wealth, primarily copper and nitrates. The relatively small central area dominates the country in terms of population and agricultural resources. This area also is the historical center from which Chile expanded until the late 19th century, when it incorporated its northern and southern regions. Southern Chile is rich in forests and grazing lands and features a string of volcanoes and lakes. The southern coast is a labyrinth of fjords, inlets, canals, twisting peninsulas, and islands. The Andes Mountains are located on the eastern border.
About 85% of Chile's population live in urban centers, with 40% living in greater Santiago. Most have Spanish ancestry. A small, yet influential number of Irish and English immigrants came to Chile during the colonial period. German immigration began in 1848 and lasted for 90 years; the southern provinces of Valdivia, Llanquihue, and Osorno show a strong German influence. Other significant immigrant groups are Italian, Croatian, French, and Middle Eastern. About 800,000 Native Americans, mostly of the Mapuche tribe, reside in the south-central area.
About 10,000 years ago, migrating Indians settled in fertile valleys and along the coast of what is now Chile. The Incas briefly extended their empire into what is now northern Chile, but the area's remoteness prevented extensive settlement. The first Europeans to arrive in Chile were Diego de Almagro and his band of Spanish conquistadors in 1541, who came from Peru in 1535 seeking gold. The Spanish encountered hundreds of thousands of Indians from various cultures in the area that modern Chile now occupies. These cultures supported themselves principally through slash-and-burn agriculture and hunting. The conquest of Chile was carried out in 1550 by Pedro de Valdivia, one of Francisco Pizarro's lieutenants. Although the Spanish did not find the extensive gold and silver they sought, they recognized the agricultural potential of Chile's central valley, and Chile became part of the Viceroyalty of Peru.
The drive for independence from Spain was precipitated by usurpation of the Spanish throne by Napoleon's brother Joseph. A national junta in the name of Ferdinand--heir to the deposed king--was formed on September 18, 1810. The junta proclaimed Chile an autonomous republic within the Spanish monarchy. A movement for total independence soon won a wide following. Spanish attempts to reimpose arbitrary rule during what was called the "Reconquista" led to a prolonged struggle.
Intermittent warfare continued until 1817, when an army led by Bernardo O'Higgins, Chile's most renowned patriot, and Jos� San Mart�n, hero of Argentine independence, crossed the Andes into Chile and defeated the royalists. On February 12, 1818, Chile was proclaimed an independent republic under O'Higgins' leadership. The political revolt brought little social change, however, and 19th century Chilean society preserved the essence of the stratified colonial social structure, which was greatly influenced by family politics and the Roman Catholic Church. The system of presidential absolutism eventually predominated, but wealthy landowners continued to control Chile. Toward the end of the 19th century, the government in Santiago consolidated its position in the south by ruthlessly suppressing the Mapuche Indians. In 1881, it signed a treaty with Argentina confirming Chilean sovereignty over the Strait of Magellan. As a result of the War of the Pacific with Peru and Bolivia (1879-83), Chile expanded its territory northward by almost one-third and acquired valuable nitrate deposits, the exploitation of which led to an era of national affluence. Chile established a parliamentary style democracy in the late 19th century, but degenerated into a system protecting the interests of the ruling oligarchy. By the 1920s, the emerging middle and working classes were powerful enough to elect a reformist president, whose program was frustrated by a conservative congress. In the 1920s, Marxist groups with strong popular support arose.
Continuing political and economic instability resulted under the rule of the quasidictatorial Gen. Carlos Ibanez (1924-32). When constitutional rule was restored in 1932, a strong middle-class party, the Radicals, emerged. It became the key force in coalition governments for the next 20 years. During the period of Radical Party dominance (1932-52), the state increased its role in the economy.
The 1964 presidential election of Christian Democrat Eduardo Frei-Montalva by an absolute majority initiated a period of major reform. Under the slogan "Revolution in Liberty," the Frei administration embarked on far-reaching social and economic programs, particularly in education, housing, and agrarian reform, including rural unionization of agricultural workers. By 1967, however, Frei encountered increasing opposition from leftists, who charged that his reforms were inadequate, and from conservatives, who found them excessive. At the end of his term, Frei had accomplished many noteworthy objectives, but he had not fully achieved his party's ambitious goals. In 1970, Senator Salvador Allende, a Marxist and member of Chile's Socialist Party, who headed the "Popular Unity" (UP) coalition of socialists, communists, radicals, and dissident Christian Democrats, won a plurality of votes in a three-way contest and was named President by the Chilean Congress. His program included the nationalization of most remaining private industries and banks, massive land expropriation, and collectivization. Allende's proposal also included the nationalization of U.S. interests in Chile's major copper mines.
Elected with only 36% of the vote and by a plurality of only 36,000 votes, Allende never enjoyed majority support in the Chilean Congress or broad popular support. Domestic production declined; severe shortages of consumer goods, food, and manufactured products were widespread; and inflation reached 1,000% per annum. Mass demonstrations, recurring strikes, violence by both government supporters and opponents, and widespread rural unrest ensued in response to the general deterioration of the economy. By 1973, Chilean society had split into two hostile camps.
A military coup overthrew Allende on September 11, 1973. As the armed forces bombarded the presidential palace, Allende reportedly committed suicide. A military government, led by General Augusto Pinochet, took over control of the country. The first years of the regime were marked by serious human rights violations. A new Constitution was approved by a plebiscite on September 11, 1980, and General Pinochet became President of the Republic for an 8-year term. In its later years, the regime gradually permitted greater freedom of assembly, speech, and association, to include trade union activity. In contrast to its authoritarian political rule, the military government pursued decidedly laissez-faire economic policies. During its 16 years in power, Chile moved away from economic statism toward a largely free market economy that fostered an increase in domestic and foreign private investment. In a plebiscite on October 5, 1988, General Pinochet was denied a second 8-year term as president. Chileans voted for elections to choose a new president and the majority of members of a two-chamber congress. On December 14, 1989, Christian Democrat Patricio Aylwin, the candidate of a coalition of 17 political parties called the Concertacion, received an absolute majority of votes. President Aylwin served from 1990 to 1994.
In December 1993, Christian Democrat Eduardo Frei Ruiz-Tagle (son of the previous President), leading the Concertacion coalition, was elected President with an absolute majority of votes, for a 6-year term. President Frei's administration was inaugurated in March 1994.
A presidential election was held on a December 12, 1999, but none of the six candidates obtained a majority, which led to an unprecedented runoff election on January 16, 2000. Ricardo Lagos Escobar of the Socialist Party and the Party for Democracy led the Concertacion coalition to a narrow victory, with 51.32% of the votes. He was sworn in March 11, 2000, for a 6-year term.
GOVERNMENT AND POLITICAL CONDITIONS
Chile's Constitution was approved in a September 1980 national plebiscite. It entered into force in March 1981. After Pinochet's defeat in the 1988 plebiscite, the Constitution was amended to ease provisions for future amendments to the Constitution, create nine appointed or "institutional" senators, and diminish the role of the National Security Council by equalizing the number of civilian and military members--four members each. Many among Chile's political class see further constitutional reform as necessary to complete the transition to democracy.
Chile's bicameral Congress has a 48-seat Senate--38 elected, 9 appointed, 1 for life--and a 120-member Chamber of Deputies. Deputies are elected every 4 years. Senators serve for 8 years with staggered terms. The current Senate is evenly split 24-24 between pro-government and opposition Senators. Nine institutional senators were appointed in 1999, and two "senators for life," former Presidents Pinochet (who resigned in 2002) and Frei. (Chile's Constitution provides that former presidents who have served at least 6 years shall be entitled to a lifetime senate seat.) The last congressional elections were held in December 2001. The current lower house--the Chamber of Deputies--contains 59 members of the governing center-left coalition and 56 from the center-right opposition. Currently 5 Deputies have their voting rights suspended. The Congress is located in the port city of Valparaiso, about 140 kilometers (84 mi.) west of the capital, Santiago.
Chile's congressional elections are governed by a unique binomial system that rewards coalition slates. Each coalition can run two candidates for the two Senate and two lower chamber seats apportioned to each chamber's electoral districts. Typically, the two largest coalitions split the seats in a district. Only if the leading coalition ticket out-polls the second-place coalition by a margin of more than 2-to-1 does the winning coalition gain both seats. In the 2001 congressional elections, the conservative Independent Democratic Union surpassed the Christian Democrats for the first time to become the largest party in the lower house. It is followed by the Christian Democrats and the center-right National Renewal Party. The Communist Party again failed to gain any seats in the 2001 elections.
Chile's judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and the Supreme Court.
Principal Government Officials
President--Ricardo LAGOS Escobar
Minister of Foreign Affairs--Mar�a Soledad ALVEAR Valenzuela
Ambassador to the United States--Andr�s BIANCHI Larre
Ambassador to the Organization of American States (OAS)--Esteban TOMIC Errazuriz
Ambassador to the United Nations--Heraldo MUNOZ
Chile maintains an embassy in the United States at 1732 Massachusetts Avenue, NW, Washington, DC 20036; tel: 202-785-1746, fax: 202-659-9624, email: email@example.com.
Chile's Armed Forces are subject to civilian control exercised by the President through the Minister of Defense. Under the 1980 Constitution, the services enjoy considerable autonomy, and the President cannot remove service commanders on his own authority.
The commander in chief of the Chilean Army is Maj. Gen. Juan Emilio Cheyre. The Chilean Army is 45,000 strong and is organized with an Army headquarters in Santiago, seven divisions throughout its territory, an Air Brigade in Rancagua, and a Special Forces Command in Colina. The Chilean Army is one of the most professional and technologically advanced armies in Latin America.
Adm. Miguel Vergara directs the 25,000-person Navy, including 5,000 Marines. Of the fleet of 29 surface vessels, only six are operational major combatants (destroyers and frigates). Those ships are based in Valparaiso. The Navy operates its own aircraft for transport and patrol; there are no fighter or bomber aircraft. The Navy also operates three submarines based in Talcahuano.
Air Force (FACH)
Gen. Osvaldo Sarabia heads a force of 12,500. Air assets are distributed among five air brigades headquartered in Iquique, Antofagasta, Santiago, Puerto Montt, and Punta Arenas. The Air Force also operates an airbase on King George Island, Antarctica.
After the military coup in September 1973, the Chilean national police (Carabineros) were incorporated into the Defense Ministry. With the return of democratic government, the police were placed under the operational control of the Interior Ministry but remained under the nominal control of the Defense Ministry. Gen. Alberto Cienfuegos is the head of the national police force of 30,000 men and women who are responsible for law enforcement, traffic management, narcotics suppression, border control, and counter-terrorism throughout Chile.
After a decade of impressive growth rates, Chile experienced a moderate recession in 1999 brought on by the global economic slowdown. The economy began to recover in 2000 with 5.4% growth, but the rate of growth slowed to 3.0% in 2001 and 1.9% in 2002. Chile's GDP is expected to grow 3%-4% in 2003.
Chile has pursued generally sound economic policies for nearly three decades. The 1973-90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization at a slower pace. The government's limited role in the economy is mostly limited to regulation, although the state continues to operate copper giant Codelco and a few other enterprises. Chile is strongly committed to free trade and has welcomed large amounts of foreign investment. High domestic savings and investment rates also helped propel Chile's economy to average growth rates of 8% during the 1990s. The privatized national pension system has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 20.7% of GDP in 2002.
Unemployment has hovered in the 8%-10% range in recent years, well above the 5%-6% average for the 1990s. Wages have risen faster than inflation as a result of higher productivity, boosting national living standards. The share of Chileans with incomes below the poverty line--defined as twice the cost of satisfying a person's minimal nutritional needs--fell from 46% of the population in 1987 to 21% in 2001. Chile's independent Central Bank pursues a policy of maintaining inflation between 2% and 4%. Inflation has not exceeded 5% since 1998. Chile registered an inflation rate of 2.8% in 2002 and is expected to see a 3% increase in 2003. Most wage settlements and spending decisions are indexed, reducing inflation's volatility. Under the compulsory private pension system, most regular workers pay 10% of their salaries into privately managed funds.
Both foreign and domestic investment in Chile have declined since the boom years of the 1990s. Total foreign direct investment flows in 2002 fell to $1.6 billion, down from $4.6 billion in 2001, $3.6 billion in 2000 and $9.2 billion in 1999. Sluggish global economic growth and volatility in other Latin American markets have reduced investment flows to Chile, although the Chilean economy has avoided crisis. The Chilean Government committed in early 2002 to undertake a series of microeconomic reforms designed to create new incentives for private investment. The government also has encouraged the use of Chile as an "investment platform" for multinational corporations planning to invest in the region.
Chile's welcoming attitude toward foreign direct investment is codified in the country's Foreign Investment Law, which gives foreign investors the same treatment as Chileans. Registration is simple and transparent, and foreign investors are guaranteed access to the official foreign exchange market to repatriate their profits and capital. The Central Bank lifted in May 1999 a 1-year residency requirement on foreign capital entering Chile under Central Bank regulations, generally for portfolio investments. A modest capital control mechanism known as the "encaje," which required international investors to place a percentage of portfolio investment in non-interest-bearing accounts for up to 2 years, also has been effectively suspended through reduction to zero of the applicable percentage; the mechanism could be resurrected depending on economic circumstances.
The U.S.-Chile Free Trade Agreement (FTA) imposes some limits on this faculty and offers a number of other investor protections.
Chile's economy is highly dependent on international trade. In 2002, exports accounted for about 27% of GDP. Chile has traditionally been dependent upon copper exports; the state-owned firm CODELCO is the world's largest copper-producing company. Nontraditional exports have grown faster than those of copper and other minerals. In 1975, non-mineral exports made up just over 30% of total exports, whereas now they account for about 60%. The most important non-mineral exports are forestry and wood products, fresh fruit and processed food, fishmeal and seafood, and wine. Total Chilean exports fell 1.2% in 2002, to $18.2 billion. Chile's export markets are fairly balanced among Europe (24%), Asia (25%), Latin America, and North America (27%). The U.S., the largest national market, takes in 20.7% of Chile's exports. Asia has been the fastest-growing export market in recent years.
Chilean imports fell 3.5% in 2002, to $15.9 billion, reflecting reduced consumer demand and deferred investment. Capital goods made up about 22% of total imports. The United States provided 16 % of Chilean imports in 2002. U.S market share was down from nearly 20% in 2000. As a bloc, the EU in 2002 supplied 19% of Chile's imports, while Argentina supplied a similar amount. Chile unilaterally lowered its across-the-board import tariff--for all countries with which it does not have a trade agreement--to 6% in early 2003.
Higher effective tariffs are charged only on imports of wheat, wheat flour, vegetable oils, and sugar as a result of a system of import price bands. The price bands were ruled inconsistent with Chile's WTO obligations in 2002 and the government has introduced legislation to modify them. Chile will have to phase out the price bands within 12 years under the terms of the U.S.-Chile FTA.
Successive Chilean governments have actively pursued liberalizing trade agreements. During the 1990's, Chile signed FTA's with Canada, Mexico, and Central America. Chile also concluded preferential trade agreements with Venezuela, Colombia, and Ecuador. An association agreement with Mercosur--Argentina, Brazil, Paraguay, and Uruguay--went into effect in October 1996. Chile, a member of the Asia-Pacific Economic Cooperation (APEC) organization, is seeking to boost commercial ties to Asian markets. Continuing its export-oriented development strategy, Chile completed landmark free trade agreements in 2002 with the European Union and South Korea. In December 2002, after two years of talks, the United States and Chile concluded negotiations on an ambitious FTA and signed the agreement in June 2003. The agreement will lead to completely duty free bilateral trade within 12 years. The U.S.-Chile FTA entered into force January 1, 2004 following approval by the U.S and Chilean congresses. Chile has been a strong proponent of pressing ahead on negotiations for a Free Trade Area of the Americas (FTAA).
Chile's financial sector has grown faster than other areas of the economy over the last few years; a banking reform law approved in 1997 broadened the scope of permissible foreign activity for Chilean banks. The Chilean Government implemented a further liberalization of capital markets in 2001. Chileans have enjoyed the recent introduction of new financial tools such as home equity loans, currency futures and options, factoring, leasing, and debit cards. The introduction of these new products has been accompanied by increased use of traditional instruments such as loans and credit cards. Chile's private pension system, with assets worth roughly $35 billion at the end of February 2003, has provided an important source of investment capital for the stock market. Chile has maintained one of the best credit ratings (S+P A-) in Latin America despite the 1999 economic slump. In recent years, many Chilean companies have raised capital abroad due to lower interest rates abroad. There are three main ways Chilean firms raise funds abroad: bank loans, issuance of bonds, and the selling of stock on U.S. markets through American Depository Receipts (ADR's). Nearly all of the funds raised go to finance investment. The government is paying down its foreign debt. The combined public and private foreign debt was roughly over 50% of GDP at the end of 2002--low by Latin American standards.
Since its return to democracy in 1990, Chile has been an active participant in the international political arena. Chile assumed a 2-year non-permanent position on the UN Security Council in January and is an active member of the UN family of agencies, serving as a member of the Commission on Human Rights and participating in UN peacekeeping activities. Chile hosted the second Summit of the Americas in 1998, was the chair of the Rio Group in 2001, and hosted the Defense Ministerial of the Americas in 2002. Looking ahead, Santiago will host the APEC summit and related meetings in 2004 and the Community of Democracies ministerial in 2005. An associate member of Mercosur and a full member of APEC, Chile and has been a leading advocate on international economic issues and hemispheric free trade.
The Chilean Government has diplomatic relations with most countries and has settled nearly all of its territorial disputes, most notably with Argentina during the 1990s. Chile and Bolivia severed diplomatic ties in 1978 over Bolivia's desire to reacquire territory it lost to Chile in 1879-83 War of the Pacific. The two countries maintain consular relations.
Relations between the United States and Chile are better now than at any other time in history. The U.S. Government applauded the rebirth of democratic practices in Chile in the late 1980s and early 1990s and sees the maintenance of a vibrant democracy and a healthy and sustainable economy as among the most important U.S. interests in Chile. In December 2000 the United States and Chile initiated negotiations for a bilateral free trade agreement and completed negotiations in December 2002. The two governments consult frequently on issues of mutual concern, and dialogue takes place in five major bilateral commissions--covering defense, agriculture, trade and investment, and bilateral issues.
U.S. Embassy Functions
In addition to working closely with Chilean Government officials to strengthen our bilateral relationship, the U.S. Embassy in Santiago provides a wide range of services to U.S. citizens and businesses in Chile. (Please see the embassy's home page for details of these services.) The embassy also is the locus for a number of American community activities in the Santiago area. Public Affairs works closely with universities and NGOs on a variety of programs of bilateral interest. Of special note are extensive U.S. Speaker, International Visitor, and Fulbright programs. Themes of particular interest include judicial reform, environmental concerns, and promotion of trade.
Attaches at the embassy from the Foreign Commercial Service, Foreign Agricultural Service, and the Animal and Plant Health Inspection Service (APHIS) work closely with the hundreds of U.S. companies that export to or maintain offices in Chile. These officers provide information on Chilean trade and industry regulations and administer several programs intended to support U.S. companies' sales in Chile.
The Consular section of the embassy provides vital services to the more than 12,000 U.S. citizens residing in Chile. Among other services, the Consular section assists Americans who wish to participate in U.S. elections while abroad and provides U.S. tax information. Besides the U.S. citizens resident in Chile, more than 120,000 U.S. citizens visit annually. The Consular section offers passport and emergency services to U.S. tourists as needed during their stay in Chile. It also issues more than 60,000 visitors' visas annually to Chilean citizens who plan to travel to the United States.
The Public Affairs Office works daily with Chilean media, which has a keen interest in bilateral and regional relations. It also assists visiting foreign media, including U.S. journalists, and is regularly involved in press events for high-level visitors. Recent issues of great interest to the media include U.S. views on the evolving Pinochet case, and other cases associated with his regime.
Principal U.S. Embassy Officials
Ambassador--William R. Brownfield
Deputy Chief of Mission--Philip S. Goldberg
Public Affairs Counselor--Julie Gianelloni Connor
Management Counselor--Floyd S. Cable
Commercial Counselor--Americo A. Tadeu
Economic and Political Counselor--Andrew G. Chritton
Acting Consul General--Paul Fermoile
Defense Attach�--Capt. David Cazares, USN
Military Group Commander--Col. Alexander Trujillo
Agricultural Counselor--Christine Sloop
APHIS Attach�--Eric R. Hoffman
Legal Attach�--Joseph Tipton
DEA--James C. Kuykendall
The U.S. Embassy and Consulate in Santiago are located at 2800 Andres Bello Avenue, Las Condes, (tel. 562-232-2600; fax: 562-330-3710). The mailing address is Casilla 27-D, Santiago, Chile.
Other Contact Information
American Chamber of Commerce in Chile
Avenida Presidente Kennedy 5735, Oficina 201
El Torre Poniente, Las Condes
Comite de Inversiones Extranjeras (Foreign Investment Committee)
Karin Poniachik, Executive Vice President
Teatinos 120, P. 10; Santiago, Chile
Chilean Government Agencies
U.S. Department of Commerce
Trade Information Center
International Trade Administration
14th and Constitution Avenue, NW
Washington, DC 20230
Home page: http://www.export.gov and http://www.buyusa.gov/chile
For the most current version of this Note, see Background Notes A-Z.