Travel Tips Chile

Prior to the coming of the Spanish in the 16th century, northern Chile was under Inca rule while Araucanian Indians inhabited central and southern Chile; the latter were not completely subjugated until the early 1880s. Although Chile declared its independence in 1810, decisive victory over the Spanish was not achieved until 1818. In the War of the Pacific (1879-84), Chile defeated Peru and Bolivia and won its present northern lands. A three-year-old Marxist government of Salvador ALLENDE was overthrown in 1973 by a dictatorial military regime led by Augusto PINOCHET, who ruled until a freely elected president was installed in 1990. Sound economic policies, maintained consistently since the 1980s, have contributed to steady growth and have helped secure the country's commitment to democratic and representative government. Chile has increasingly assumed regional and international leadership roles befitting its status as a stable, democratic nation.

Chile was originally under the control of the Incas in the north and the nomadic Araucanos in the south. In 1541, a Spaniard, Pedro de Valdivia, founded Santiago. Chile won its independence from Spain in 1818 under Bernardo O'Higgins and an Argentinian, José de San Martin. O'Higgins, dictator until 1823, laid the foundations of the modern state with a two-party system and a centralized government.

The dictator from 1830 to 1837, Diego Portales, fought a war with Peru in 1836–1839 that expanded Chilean territory. Chile fought the War of the Pacific with Peru and Bolivia from 1879 to 1883, winning Antofagasta, Bolivia's only outlet to the sea, and extensive areas from Peru. Pedro Montt led a revolt that overthrew José Balmaceda in 1891 and established a parliamentary dictatorship lasting until a new constitution was adopted in 1925. Industrialization began before World War I and led to the formation of Marxist groups. Juan Antonio Ríos, president during World War II, was originally pro-Nazi but in 1944 led his country into the war on the side of the Allies.

In 1970, Salvador Allende became the first president in a non-Communist country freely elected on a Marxist program. Allende quickly established relations with Cuba and the People's Republic of China, introduced Marxist economic and social reforms, and nationalized many private companies, including U.S.-owned ones. In Sept. 1973, Allende was overthrown and killed in a military coup covertly sponsored by the CIA, ending a 46-year era of constitutional government in Chile.

Chile has a market-oriented economy characterized by a high level of foreign trade. During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio AYLWIN - which took over from the military in 1990 - deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% during 1991-97, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and because of lower export earnings - the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999, reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative economic growth for the first time in more than 15 years. Despite the effects of the recession, Chile maintained its reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. By the end of 1999, exports and economic activity had begun to recover, and growth rebounded to 4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1% in 2002, largely due to lackluster global growth and the devaluation of the Argentine peso. Chile's economy began a slow recovery in 2003, growing 3.2%, and accelerated to 6.1% in 2004-05, while Chile maintained a low rate of inflation. GDP growth benefited from high copper prices, solid export earnings (particularly forestry, fishing, and mining), and stepped-up foreign direct investment. Unemployment, however, remains stubbornly high. Chile deepened its longstanding commitment to trade liberalization with the signing of a free trade agreement with the US, which took effect on 1 January 2004. Chile signed a free trade agreement with China in November 2005, and it already has several trade deals signed with other nations and blocs, including the European Union, Mercosur, South Korea, and Mexico. Record-high copper prices helped to strengthen the peso to a 5½-year high, as of December 2005, and will boost GDP in 2006.