Chile extends in a narrow ribbon 4350 km (2700 miles) down the Pacific coast of South America. The plains of the central pampa lie between a coastal range and the Andes; most of the population lives in the fertile heartland around Santiago. Glaciers are a prominent feature of the southern Andes, as are fjords, lakes, and deep sea channels. In 1989, Chile returned to elected civilian rule, following a popular rejection of the Pinochet dictatorship. A collapse in copper prices, coupled with weaker export markets, has interrupted the high growth seen in the 1990s.

One-third of Chile's population lives in Santiago, where rapid growth has created large slums. Chile has relatively few immigrants; most people are of mixed Spanish–Amerindian descent. A Commission for Historic Truth was set up in 2000 to address the problems of Amerindians. There are some 80,000 Mapuche Amerindians around Temuco in the south, 20,000 Aymara in the northern Chilean Andes, and 2000 Rapa Nui on Easter Island.

Over 25% of working women are employed in domestic service.

Strengths

World's largest copper producer. Fresh fruit exports. Strong investment inflows allowing rapid economic growth. Highest credit rating due to fiscal and monetary stability and highly liquid financial system. Development of nontraditional industries such as wine and fresh and prepared fish.

Weaknesses

Dependence on USA as single largest trading partner. Prolonged weakness in Asian export markets. Vulnerability of copper revenues, representing 40% of exports, to low world market prices.

Profile

Competing ideologies have battled over Chile's economy. Allende's socialism brought huge corporations into the state sector. The Pinochet dictatorship introduced radical monetarist policies. Drastic cutting of the state sector and the selling-off of state enterprises at below market value led to large profits for investors and speculators. Tough economic measures, irrespective of the social consequences, brought Chile's inflation rate down from 400%.

The Aylwin and Frei governments continued with neo-liberal policies, including privatizing the pension system. However, some 30 companies, including the large Codelco copper company, remain in the state sector.

Avoiding the worst of the Argentine crisis, the economy in 2002 suffered from sluggish international conditions and modest copper prices.

After 16 years of military rule under Pinochet, Chile returned to multiparty democracy in 1989.

Profile

Chilean politics is still strongly affected by the legacy of the military dictatorship of 1973–1989, which began when Pinochet's coup overthrew the elected Marxist government of Salvador Allende.

The CIA backed the Pinochet coup, anxious to halt Allende's program of nationalization of the largely US-owned copper mines. As a result thousands of Chileans were killed by the military or "disappeared," and a further 80,000 were taken as political prisoners.

Pinochet's nationalist politics drew on the example of Franco's Spain, while his economic policy was one of the first experiments in the free-market Chicago School of monetarism. Chile's business and middle classes prospered, while opposition, which was brutally suppressed by the DINA secret police, came most visibly from the Church and the urban poor.

In 1988 Pinochet, attempting to secure a popular mandate for continuing his regime, was surprised when the population emphatically voted for democracy. Pinochet stepped down, but remained head of the army. Patricio Aylwin won presidential elections held in 1989, heading Concertación, a center-left coalition.

Under Aylwin, politics became more stable, partly as a result of a cross-party consensus on economic policy. Continued growth and some progressive social measures attracted the support of the trade unions. These policies were continued under Eduardo Frei of the PS party, who was elected president in 1993.

When Pinochet retired as army chief in 1998, heated disagreements over his entry to the Congress as a senator-for-life split Concertación on broadly left and right lines. Disagreements over Pinochet's subsequent arrest and detention in Europe on human rights charges further complicated the picture. Ricardo Lagos of the PS emerged as front runner for the 1999 presidential elections, in which both the PS and the PDC presented themselves as the guarantors of peace and democracy. Right-wing opposition parties, however, also began to downplay their past links with Pinochet to broaden their electoral appeal. Lagos narrowly won a run-off poll in January 2000. Facing a better organized opposition than hitherto, the ruling center-left Concertación performed reasonably well in the 2001 elections retaining its majority in the Chamber of Deputies but losing it in the Senate.

Main Political Issues

Political consolidation

President Lagos, still Chile's most charismatic and trusted politician, reshuffled what was seen as a weak cabinet after the 2001 legislative elections to reinvigorate his government for his remaining four years in office. Top priority was to guarantee a stable environment for economic growth and job creation. The strong electoral performance of the UDI, senior partner in the right-wing Alliance for Chile opposition coalition, boosted the presidential hopes of its leader, Joaquín Lavín, currently the mayor of Santiago.

Improved relations with military

Relations between government and military are improving. Lagos appointed Chile's first woman defense minister and installed as new army commander a moderate who had accepted that Pinochet should respect the authority of the courts, before the human rights charges against the former dictator were dropped on grounds of dementia.

Chile hopes to consolidate the key relationship with its main trading partner, the USA, through a bilateral free trade agreement. During the Allende period in Chile in the early 1970s, the USA had actively worked against the government, fearing that the spread of socialism would jeopardize its investments in Chile and the rest of Latin America. The subsequent Pinochet regime's human rights record eventually became an embarrassment.

In 1999, in response to Pinochet's detention in the UK and planned extradition to Spain to stand trial on human rights charges, Chile argued that this amounted to an infringement of its sovereignty and the jurisdiction of its courts. Relations with Spain and the UK improved in 2000 following Pinochet's return to Chile.

Chile, with Bolivia, is an associate member of Mercosur, but jealously guards its right to pursue its own bilateral economic agreements. Europe's restrictions on wines and spirits complicate relations with the EU. Border disputes with Bolivia and Peru are ongoing.

Most of the officers linked to human rights abuses under the dictatorship (1973–1989) are now retired, but dozens of them still face investigation and possible trial. The army has a moderate commander and for the first time a woman, also a member of the PS, has been appointed defense minister. Despite domestic concerns on pressing social needs, President Lagos signed up to reequip the airforce with expensive US-made, F-16 fighters, still to be part-funded by 10% of copper exports under a controversial law inherited from the years of military rule. To dampen fears of arms escalation, Chile forewarned neighbors Argentina, Brazil, Peru, and Bolivia about the deal. Modernization of the navy, which was lobbying for four new frigates, is on hold.

Chile is the world's largest producer of copper, which accounts for a large proportion of its export revenues. There are important deposits of lithium, molybdenum, and especially of gold. Chile also has reserves of natural gas, oil, and coal, and plenty of hydroelectric potential. In addition, it leads the world in fishmeal production, and has a flourishing wine industry.

Environmental concerns do not rank highly on the political agenda. Severe smogs still cover Santiago, due in part to diesel fumes from the city's 14,500 buses. The chief concern is logging in the south by Japanese and other foreign companies. The huge growth of the salmon industry, which fences off sea lakes, is resulting in dolphins losing their natural habitats. Overfishing of swordfish has led to friction with the EU, particularly Spain.

The state railroad is being upgraded with private capital assistance: suburban services into Santiago are being improved, and line repairs and better rolling stock will shorten journeys from Santiago to Temuco. Sections of the Pan-American Highway, the sole arterial road running from the Peruvian border to Puerto Montt, are being upgraded. The USA's open skies agreement with Chile reached in 1999, the first with a South American country, gives Chile strong regional and international links.

Recent growth has meant increased public spending on health, but 2002 saw cuts. The public health service covers 80% of people, but is mostly found in urban areas. There is private care for the rich. Infant mortality has fallen to one-third of the 1980 level.

Economic growth has permitted public spending on education to increase substantially, but the sector suffers from budgetary cuts. Free primary education is officially compulsory for eight years. Human rights issues now appear in school curricula.

The judiciary has been slow to pursue human rights cases from the Pinochet regime, despite the discoveries during the 1990s of mass graves of victims of the DINA (secret police). Mapuche leaders were among the "disappeared." Levels of child abuse are exceptionally high, although now starting to fall.

Chile's traditionally large middle class did well under Pinochet and the economic policies of the Chicago School. The wealthiest sections benefited considerably from the sale of state assets at 40%–50% of their true market value. Five years into the regime, wealth had become highly concentrated, with just nine economic conglomerates controlling the assets of the top 250 businesses, 82% of banking, and 64% of all financial loans. The regime's artificially high domestic interest rates enabled those with access to international finance to earn an estimated $800 million between 1977 and 1980, simply by borrowing abroad and lending at home. These groups have retained their position.

The poor, by contrast, are over 15% worse off than in 1970, with an estimated four million people living just above the UN poverty line and one million below it.

The Pinochet years saw a dramatic decline in tourists from the USA and Europe, although the numbers from neighboring countries held up. Since 1989, visitors have returned, but in 1999 some 60% of them still came from Argentina and Peru. Investment in the sector totaled $2.17 billion in the first half of 2000, up 3.8% on the same period in 1999. Accordingly, Chile is making more of its stunning Andean scenery, its immensely long coastline and a number of exceptional sites, including Chuquicamata, the world's largest copper mine, the Elqui Valley wine-growing region, and the spectacular glaciers and fjords of southern Chile. Easter Island in the Pacific is another major attraction.

The Spanish first attempted the conquest of Chile against the fierce indigenous Araucanian people in 1535. Santiago was founded in 1541. Chile was subject to Spanish rule until independence in 1818.

• 1817–1818 Bernardo O'Higgins leads republican Army of the Andes in victories against royalist forces.
• 1879–1883 War of the Pacific with Bolivia and Peru. Chile gains valuable nitrate regions.
• 1891–1924 Parliamentary republic ends with growing political chaos.
• 1936–1946 Communist, Radical, and Socialist parties form influential Popular Front coalition.
• 1943 Chile backs USA in World War II.
• 1946–1964 Right-wing Chilean presidents follow US McCarthy policy and marginalize the left.
• 1970 Salvador Allende elected. Reforms provoke strong reaction from the right.
• 1973 Allende dies in army coup. Brutal dictatorship of Gen. Pinochet.
• 1988 Referendum votes "no" to Pinochet staying in power.
• 1989 Democracy peacefully restored; Pinochet steps down after Aylwin election victory.
• 1998 Pinochet detained in UK pending extradition to Spain on human rights charges.
• 2000 Ricardo Lagos (PS) sworn in as president. Pinochet, deemed unfit to face trial, returns to Chile, where charges are suspended in 2001.