For the most current version of this Note, see Background Notes A-Z.

PROFILE

Official Name:
Republic of Chile

Geography
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.

People
Nationality: Noun and adjective--Chilean(s).
Population (2000): 15.2 million.
Annual population growth rate: 1.2%.
Ethnic groups: Spanish-Native-American (mestizo), European, Native-American.
Religions: Roman Catholic 77%; Protestant 12%.
Language: Spanish.
Education: Years compulsory--8. Attendance--3 million. Adult literacy rate--95%.
Health: Infant mortality rate--10/1,000. Life expectancy--75 yrs.
Work force (5.8 million): Services and government--36%; industry and commerce--34%; agriculture, forestry, and fishing--14%; construction--7%; mining--2%.

Government
Type: Republic.
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 three elections. Suffrage: Universal at 18, including foreigners legally resident for more than 5 years.

Economy (2000)
GDP: $69.9 billion.
Annual real growth rate: 5.4%.
Per capita GDP: $4,600.
Commerce (18.8% of GDP): Sales, restaurants, hotels.
Manufacturing (16.3% of GDP): Types--mineral refining, metal manufacturing, food processing, fish processing, paper and wood products, finished textiles.
Financial services (15.2% of GDP): Insurance, leasing, consulting.
Mining (11.4% of GDP): Copper, iron ore, nitrates, precious metals, and molybdenum.
Forestry, agriculture, and fisheries (8.3% of GDP): Products--wheat, potatoes, corn, sugarbeets, onions, beans, fruits, livestock, fish.
Trade: Exports--$18.2 billion: copper, fishmeal, fruits, wood products, paper products. Major markets--EU 25%, U.S. 17%, Japan 15%, U.K. 6%, Argentina 3%, Brazil 5%.
Imports--$16.7 billion: petroleum, chemical products, capital goods, vehicles, electronic equipment, consumer durables, machinery. Major suppliers--U.S. 18%, EU 18%, Argentina 15%, Brazil 7%, China 5%, Japan 4%, Germany 4%.

PEOPLE
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.

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. It also has small, rapidly declining petroleum reserves, which supplied about 8% of Chile's domestic requirements during 1996.

HISTORY
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. In 1541, the Spanish, under Pedro de Valdivia, 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. 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. Spanish attempts to reimpose arbitrary rule during what was called the Reconquista led to a prolonged struggle under Bernardo O'Higgins, Chile's most renowned patriot. Chilean independence was formally proclaimed on February 12, 1818.

The political revolt brought little social change, however, and 19th century Chilean society preserved the essence of the stratified colonial social structure, family politics, and the influence of the Roman Catholic Church. The system of presidential power eventually predominated, but wealthy landowners continued to control Chile.

Toward the end of the 19th century, government in Santiago consolidated its position in the south by persistently 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, which tended to protect 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. Continuing political and economic instability resulted in the quasi-dictatorial rule of General 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. In the 1920s, Marxist groups with strong popular support developed. 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.

In 1970, Dr. 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, was elected by a narrow margin. 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.

GOVERNMENT AND POLITICAL CONDITIONS
Following a coup in 1973, Chile was ruled by a military regime which lasted until 1990. The first years of the regime, headed by Gen. Augusto Pinochet, were marked by serious human rights violations. 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.

General Pinochet was denied a second 8-year term as president in a national plebiscite in 1988. In December 1989, Christian Democrat Patricio Aylwin, running as the candidate of a multiparty, Concertaci�n coalition, was elected president. In the 1993 election, Eduardo Frei Ruiz-Tagle of the Christian Democratic Party was elected president for a 6-year term leading the Concertaci�n coalition, and took office in March 1994. Exceptionally close presidential elections in December 1999 required an unprecedented runoff election in January 2000. Ricardo Lagos Escobar of the Socialist Party and Party for Democracy led the Concertacion coalition to a narrow victory and took office in March 2000.

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 consider these and other provisions as "authoritarian enclaves" of the constitution and have begun to press for reform.

Chile's bicameral Congress has a 49-seat Senate--38 elected, 9 appointed, 2 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 contains 20 members from the center-left governing coalition, 18 from the rightist opposition. In March 1998, nine newly appointed institutional senators appointed in 1999, and two "senators for life," former Presidents Pinochet 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 1997. The next congressional elections are scheduled for October 2001. The current lower house--the Chamber of Deputies-- contains 70 members of the governing coalition and 50 from the rightist opposition. 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. The political parties with the largest representation in the current Chilean Congress are the centrist Christian Democrat Party and the center-right National Renewal Party. The Communist Party and the small Humanist Party failed to gain any seats in the 1997 elections.

Chile's judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and the Supreme Court.

DEFENSE
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.

Army. The Commander in Chief is Lt. Gen. Ricardo Izurieta. The 50,000-person army is organized into seven divisions and an air brigade.

Navy. Adm. Jorge Arancibia directs the 25,000-person navy, including 5,200 marines. Of the fleet of 29 surface vessels, only six are major combatant ships and they are based in Valpara�so. 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. Gen. Patricio Rios 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.

The Chilean police are comprised of a national, uniformed force (Carabineros) and a smaller, plainclothes investigations force. After the military coup in September 1973, the Chilean national police 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 remain under the nominal control of the Defense Ministry. Gen. Manuel Ugarte Soto, who directs the national police force of 30,000, is responsible for law enforcement, traffic management, narcotics suppression, border control, and counter-terrorism throughout Chile.

ECONOMY
After a decade of highly impressive growth rates, Chile experienced a moderate recession in 1999 brought on by the global economic slowdown. After averaging real GDP growth rates of around 7% in the 1990s, the economy grew 3.4% in 1998 and contracted 1.1% in 1999. The economy has recovered in 2000, with Asian markets rebounding and copper prices edging up. GDP growth for 2001 is expected in the 5%-6% range.

The government's limited role in the economy, Chile's openness to international trade and investment, and the high domestic savings and investment rates that propelled Chile's economy to average growth rates of 8% during the decade before the recession are still in place. The 1973-90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization at a slower pace. Policy measures such as the privatization of the national pension system encourage domestic investment, contributing to an estimated total domestic savings rate of approximately 22% of GDP in 2000.

Unemployment peaked well above Chile's traditional 4%-6% range during the recession and is stubbornly remaining in the 8%-10% range well into the economic recovery. Despite recent labor troubles, wages have on average risen faster than inflation over the last several years as a result of higher productivity, boosting national living standards. The share of Chileans with incomes below the poverty line--roughly $4,000/year for a family of four--fell from 46% of the population in 1987 to 23% in 1998.

Maintaining a moderate inflation level is a foremost Central Bank objective. In 1996, December-to-December inflation stood at 8.2%, falling to 6.1% in 1997 and to 4.7% in 1998. The rate fell to only 2.3% during the 1999 recession. Most wage settlements and spending decisions are indexed, reducing inflation volatility. The rate for 2000 was 4.75%. The establishment of a compulsory private sector pension system in 1981 was an important step toward increasing domestic savings and the pool of investment capital. Under this system, most regular workers pay 10% of their salaries into privately managed funds. This large capital pool has been supplemented by substantial foreign investment.

Total public and private investment in the Chilean economy has remained high despite current economic difficulties. The government recognizes the necessity of private investment to boost worker productivity. The government also is encouraging diversification, including such nontraditional exports as fruit, wine, and fish to reduce the relative importance of basic traditional exports such as copper, timber, and other natural resources.

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 decided in May 1999 on the removal of the 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 requires international investors to place a percentage of portfolio investment in noninterest-bearing accounts for up to 2 years, has been effectively suspended through reduction to zero of the applicable percentage; the mechanism could be resurrected depending on economic circumstances.

Total foreign direct investment flows in 2000 contracted to $3.6 billion , down from $9.2 billion in 1999, and $4.6 billion in 1998. The 2000 figure is about 13% of GDP. In 2000, Chile experienced an outflow of $1.4 billion, largely the result of diminished inward foreign investment and--for a second year running--elevated levels of Chilean direct investment abroad ($4.8 billion).

Foreign Trade
Chile's economy is highly dependent on international trade. In 1999, exports increased to $18.3 billion from $15.6 billion in 1999, and imports increased to $16.9 billion from $14 billion the previous year. Exports accounted for about 25% of GDP. Chile has traditionally been dependent upon copper exports; the state-owned firm CODELCO is the world's second-largest copper-producing company. Foreign private investment has developed many new mines, and the private sector now produces more copper than CODELCO. Copper output continued to increase in 2000. Nontraditional exports have grown faster than those of copper and other minerals. In 1975, nonmineral exports made up just over 30% of total exports, whereas now they account for about 60%. The most important nonmineral exports are forestry and wood products, fresh fruit and processed food, fishmeal and seafood, and other manufactured products.

Chile's export markets are fairly balanced among Europe, Asia, Latin America, and North America. The U.S., the largest-single market, takes in 17% of Chile's exports. Latin America has been the fastest-growing export market in recent years. The government actively seeks to promote Chile's exports globally. Since 1991, Chile has signed free trade agreements with several countries, including Canada, Mexico, 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. Chile has begun free trade agreement discussions with the European Union.

In keeping with its trade-oriented development strategy, Chile is currently in negotiations with the U.S. on a free trade agreement; U.S. negotiating ability has been constrained in the absence of "fast-track" negotiating authority. Chile's 1996 free trade agreement with Canada was modeled largely on NAFTA in anticipation of an eventual trade pact with the United States; similarly, Chile broadened its bilateral free trade agreement with Mexico in August 1998. Chile has been a strong proponent of pressing ahead on negotiations for a Free Trade Area of the Americas (FTAA) agreement.

After growing for several years, imports were down in 1998 and 1999, reflecting reduced consumer demand and deferred investment. Imports have rebounded in 2000 and are up 19% over 1999; capital goods make up about 22% of total imports. The United States is Chile's largest-single supplier, supplying 18.5% of the country's imports in 2000, down from 21% in 1999. Chile unilaterally is lowering its across-the-board import tariff--for all countries with which it does not have a trade agreement--by a percentage point each year until it reaches 6% in 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.

Finance
Chile's financial sector has grown faster than other areas of the economy over the last few years; a banking law reform approved in 1997 broadened the scope of permissible foreign activity for Chilean banks. Domestically, 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 $36 billion at the end of September 2000, has provided an important source of investment capital for the stock market. Chile has maintained one of the best credit ratings in Latin America despite the 1999 economic slump. In recent years, many Chilean companies have sought to raise capital abroad due to the relatively lower interest rates outside of Chile. 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 (ADRs). Nearly all of the funds raised go to finance investment. The government is rapidly paying down its foreign debt. The combined public and private foreign debt was roughly 50% of GDP at the end of 2000, low by Latin American standards.

FOREIGN RELATIONS
With its return to democracy in 1990, Chile became an active participant in the international political arena. It is an active member of the Rio Group, and it rejoined the Non-Aligned Movement. Chile was a driving force in the World Summit for Social Development held in Copenhagen in March 1995. Chile is an active member of the United Nations and the UN family of agencies, serving on the UN Security Council from 1995-97. Chile participates in UN peacekeeping activities.

The Chilean Government has diplomatic relations with most countries, including Cuba. Chile maintains only consular relations with Bolivia; Chile's acquisition of territory during the War of the Pacific (1879-83) continues adversely to influence its relations with Bolivia. Chile's association with the MERCOSUR countries in 1996 and its continuing interest in hemispheric free trade, as well as its membership in the Asia-Pacific Economic Cooperation grouping, auger well for even closer international economic ties in the future. Politically, Chile has been one of the most active countries in supporting the Summit of the Americas process, hosting the second Summit of the Americas in Santiago, April 1998.

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--Juan Gabriel VALDES

Chile maintains an embassy in the United States at:
1140 Connecticut Avenue, NW
Washington, DC 20036
Tel: 202-785-1746
Fax: 202-659-9624
Email: embassy@embassyofchile.org
Website: http://www.chile-usa.org

U.S.-CHILEAN 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. 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.

Many other prominent Americans and senior U.S. officials visited Chile during the period 1995-2000, including Hillary Rodham Clinton; former-Presidents Carter, Bush, and Ford; former Secretary of State Christopher; Secretary of State Albright; Secretary of Defense Cohen; other Members of the Cabinet and Congress; and senior members of the U.S. military, addressing issues ranging from education to international trade.

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 http://www.usembassy.cl/ 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 and Foreign Agriculture Service work closely with the hundreds of U.S. companies which maintain offices in Chile. These officers provide information on Chilean trade and industry regulations and administer several programs intended to support U.S. companies starting or maintaining business ventures in Chile.

The Consular section of the embassy provides vital services to the more than 10,000 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 residents 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 over 60,000 visitors' visas annually to Chilean citizens who plan to travel to the U.S.

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--John O'Leary
Deputy Chief of Mission--James J. Carragher
Economic and Political Counselor--Brian J. Blood
Agricultural Counselor--Lewis Stockard
Consul General--Carl F. Troy
Administrative Counselor--David Davison
Commercial Counselor--John A. Harris
Defense Attache--Capt. Larry Pacentrilli, USN
Public Affairs Officer--Kathleen A. Brion
Military Group Commander--Col. Alexander Trujillo

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. The embassy's home page is at: http://www.usembassy.cl.

Other Contact Information
American Chamber of Commerce in Chile
Avenida Presidente Kennedy 5735, Oficina 201
El Torre Poniente, Las Condes
Santiago
Tel: 562-290-9700
Fax: 562-212-2620
Email: amcham@amchamchile.cl
Website: http://www.amchamchile.cl

U.S. Department of Commerce
Trade Information Center
International Trade Administration
14th and Constitution Avenue, NW
Washington, DC 20230
Tel: 800-USA-TRADE
Fax: 202-482-4726
Home page: http://www.ita.doc.gov

[This is a mobile copy of Chile (04/01)]