U.S. Department of State Background Note
Sponsored LinksTravel reviews & great deals at TripAdvisor:
The northern Chilean desert contains great mineral wealth, principally copper. The relatively small central area dominates the country in terms of population and agricultural resources. This area also is the cultural and political center from which Chile expanded in 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 lives in urban areas, 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, Basque, and Palestinian. About 800,000 Native Americans, mostly of the Mapuche tribe, reside in the south-central area. The Aymara and Diaguita groups can be found mainly in Chile’s northern desert valleys.
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 barrenness prevented extensive settlement. The first Europeans to arrive in Chile were Diego de Almagro and his band of Spanish conquistadors, who came from Peru seeking gold in 1535. 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 began in earnest in 1540 and was carried out by Pedro de Valdivia, one of Francisco Pizarro's lieutenants, who founded the city of Santiago on February 12, 1541. 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 in 1808. 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 José San Martín, 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. A strong presidency eventually emerged, but wealthy landowners remained extremely powerful. 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 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 with 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 private industries and banks, massive land expropriation, and collectivization. Allende's program 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 in particular 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, was elected president. Aylwin served from 1990 to 1994 and was succeeded by another Christian Democrat, Eduardo Frei Ruiz-Tagle (son of the previous President), leading the same coalition, for a 6-year term. Ricardo Lagos Escobar of the Socialist Party and the Party for Democracy led the Concertacion to a narrower victory in 2000 presidential elections. His term ended on March 11, 2006, when President Michelle Bachelet Jeria took office.
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. In September 2005, President Ricardo Lagos signed into law several constitutional amendments passed by Congress. These include eliminating the positions of appointed senators and senators for life, granting the President authority to remove the commanders-in-chief of the armed forces, and reducing the presidential term from six to four years.
Presidential and congressional elections were held December 2005 and January 2006. In the first round of presidential elections, none of the four presidential candidates won more than 50% of the vote. As a result, the top two vote-getters--center-left Concertacion coalition’s Michelle Bachelet and center-right Alianza coalition’s Sebastian Pinera--competed in a run-off election on January 15, 2006, which Michelle Bachelet won. This was Chile’s fourth presidential election since the end of the Pinochet era. All four have been judged free and fair. The President is constitutionally barred from serving consecutive terms. President Bachelet and the new members of Congress took office on March 11, 2006.
Chile has a bicameral Congress, which meets in the port city of Valparaiso, about 140 kilometers (84 mi.) west of the capital, Santiago. Deputies are elected every 4 years, and Senators serve 8-year terms. 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 Deputy seats apportioned to each electoral district. Historically, the two largest coalitions (Concertacion and Alianza) split most of 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 December 11, 2005 congressional elections, the Concertacion coalition won a majority in both the Senate and the Chamber of Deputies. In the 38-member Senate, the Concertacion coalition holds 20 seats and the Alianza opposition holds 17. There is one independent. In the 120-member Chamber of Deputies, the Concertacion coalitions holds 65 seats and the Alianza holds 54. There is one independent.
Chile's judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and the Supreme Court. In June 2005, Chile completed a nation-wide overhaul of its criminal justice system. The reform has replaced inquisitorial proceedings with an adversarial system more similar to that of the United States.
Principal Government Officials
Chile's Armed Forces are subject to civilian control exercised by the President through the Minister of Defense. The President has the authority to remove the commanders-in-chief of the armed forces.
Air Force (FACH)
After a decade of impressive growth rates, Chile began to experience a moderate economic downturn in 1999, brought on by unfavorable global economic conditions related to the Asian financial crisis, which began in 1997. The economy remained sluggish until 2003, when it began to show clear signs of recovery, achieving 3.3% real GDP growth. The Chilean economy finished 2004 with growth of 6.1%. Real GDP growth reached 6.3% in 2005 before falling back to 4.0% growth in 2006. Higher energy prices as well as lagging consumer demand were drags on the economy in 2006. Higher Chilean Government spending and favorable external conditions (including record copper prices for much of 2006) were not enough to offset these drags. For the first time in many years, Chilean economic growth in 2006 was among the weakest in Latin America.
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, though at a slower pace. The government's role in the economy is mostly limited to regulation, although the state continues to operate copper giant CODELCO and a few other enterprises (there is one state-run bank). Chile is strongly committed to free trade and has welcomed large amounts of foreign investment. Chile has signed free trade agreements (FTAs) with a whole network of countries, including an FTA with the United States, which was signed in 2003 and implemented in January 2004. Over the last several years, Chile has signed FTAs with the European Union, South Korea, New Zealand, Singapore, Brunei, China, and Japan. It reached a partial trade agreement with India in 2005 and began negotiations for a full-fledged FTA with India in 2006. Chile plans to continue its focus on its trade ties with Asia by negotiating in 2007 trade agreements with Thailand, Malaysia, and Australia.
High domestic savings and investment rates helped propel Chile's economy to average growth rates of 8% during the 1990s. The privatized national pension system (AFP) has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 21% of GDP. However, the AFP is not without its critics, who cite low participation rates (only 55% of the working population is covered), with groups such as the self-employed outside the system. There has also been criticism of the inefficiency and high costs due to a lack of competition among pension funds. Critics cite loopholes in the use of pension savings through lump sum withdraws for the purchase of a second home or payment of university fees as fundamental weaknesses of the AFP. The Bachelet administration plans substantial reform, but not an overhaul, of the AFP during the next several years.
Unemployment stubbornly hovered in the 8%-10% range after the start of the economic slowdown in 1999, well above the 5%-6% average for the 1990s. Unemployment finally dipped to 7.8% at the end of 2006, due largely to the fact that fewer Chileans were entering the workforce rather than to a substantial and sustained creation of new jobs. Most international observers place some of the blame for Chile’s consistently high unemployment rate on complicated and restrictive labor laws. Wages have risen faster than inflation as a result of higher productivity, boosting national living standards. The percentage of Chileans with incomes below the poverty line--defined as twice the cost of satisfying a family of four’s minimal nutritional needs--fell from 46% in 1987 to around 18% by 2004.
Chile's independent Central Bank pursues an inflation target of between 2% and 4%. Inflation has not exceeded 5% since 1998. Chile registered an inflation rate of 3.2% in 2006. The Chilean peso’s rapid appreciation against the U.S. dollar in recent years has helped dampen inflation. Most wage settlements and loans are indexed, reducing inflation's volatility. Under the compulsory private pension system, most formal sector employees pay 10% of their salaries into privately managed funds.
Total foreign direct investment (FDI) was only $3.4 billion in 2006, up 52% from a poor performance in 2005. However, 80% of FDI continues to go to only four sectors: electricity, gas, water and mining. Much of the jump in FDI in 2006 was also the result of acquisitions and mergers and has done little to create new employment in Chile. The Chilean Government has formed a Council on Innovation and Competition, which is tasked with identifying new sectors and industries to promote. It is hoped that this, combined with some tax reforms to encourage domestic and foreign investment in research and development, will bring in additional FDI and to new parts of the economy. As of 2006, Chile invested only 0.6% of its annual GDP in research and development (R&D). Even then, two-thirds of that was government spending. The fact that domestic and foreign companies spend almost nothing on R&D does not bode well for the Government of Chile’s efforts to develop innovative, knowledge-based sectors. Additionally, on January 8, 2007, Chile was placed on the U.S. Trade Representative’s Priority Watch List due to its poor record on protecting intellectual property rights. Chile is only the second U.S. FTA partner ever to be placed on the Priority Watch List. Chile has a poor and deteriorating record of protecting copyrighted music, films, and software. Combined with this is its institutional structure allowing local companies to produce and market pharmaceutical generics that violate existing patents. Beyond its general economic and political stability, the government also has encouraged the use of Chile as an "investment platform" for multinational corporations planning to operate in the region, but this will have limited value given the developing business climate in Chile itself. Chile's approach to 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. While Chile and the EU have signed a double taxation treaty, no such agreement exists between the U.S. and Chile.
The main destinations for Chilean exports were the Americas (U.S. $39 billion), Asia (U.S. $27.8 billion) and Europe (U.S. $22.2 billion). Seen as shares of Chile’s export markets, 42% of exports went to the Americas, 30% to Asia and 24% to Europe. Within Chile’s diversified network of trade relationships, its most important partner remained the United States. Total trade with the U.S. was U.S. $14.8 billion in 2006. Since the U.S.-Chile Free Trade Agreement went into effect on January 1, 2004, U.S.-Chilean trade has increased by 154%. Internal Government of Chile figures show that even when factoring out inflation and the recent high price of copper, bilateral trade between the U.S. and Chile has grown over 60% since then.
Total trade with Europe also grew in 2006, expanding by 42%. The Netherlands and Italy were Chile’s main European trading partners. Total trade with Asia also grew significantly at nearly 31%. Trade with Korea and Japan grew significantly, but China remained Chile’s most important trading partner in Asia. Chile’s total trade with China reached U.S. $8.8 billion in 2006, representing nearly 66% of the value of its trade relationship with Asia.
The growth of exports in 2006 was due mainly to a strong increase in sales to the United States, the Netherlands, and Japan. These three markets alone accounted for an additional U.S. $5.5 billion worth of Chilean exports. Chilean exports to the United States totaled U.S. $9.3 billion, representing a 37.7% increase compared to 2005 (U.S. $6.7 billion). Exports to the European Union were U.S. $15.4 billion, a 63.7% increased compared to 2005 (U.S. $9.4 billion). Exports to Asia increased from U.S. $15.2 billion in 2005 to U.S. $19.7 billion in 2006, a 29.9% increase.
During 2006, Chile imported U.S. $26 billion from the Americas, representing 54% of total imports, followed by Asia at 22%, and Europe at 16%. Mercosur members were the main suppliers of imports to Chile at U.S. $9.1 billion, followed by the United States with U.S. $5.5 billion and the European Union with U.S. $5.2 billion. From Asia, China was the most important exporter to Chile, with goods valued at U.S. $3.6 billion. Year-on-year growth in imports was especially strong from a number of countries--Ecuador (123.9%), Thailand (72.1%), Korea (52.6%), and China (36.9%).
Chile’s overall trade profile has traditionally been dependent upon copper exports. The state-owned firm CODELCO is the world's largest copper-producing company, with recorded copper reserves of 200 years. Chile has made an effort to expand nontraditional exports. The most important non-mineral exports are forestry and wood products, fresh fruit and processed food, fishmeal and seafood, and wine.
Successive Chilean governments have actively pursued trade-liberalizing agreements. During the 1990s, Chile signed FTAs 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. Continuing its export-oriented development strategy, Chile completed landmark free trade agreements in 2002 with the European Union and South Korea. Chile, as a member of the Asia-Pacific Economic Cooperation (APEC) organization, is seeking to boost commercial ties to Asian markets. To that end, it has signed trade agreements in recent years with New Zealand, Singapore, Brunei, India, China, and most recently Japan. In 2007, Chile plans to begin negotiations with Thailand, Malaysia, and Australia.
After two years of negotiations, the United States and Chile signed an agreement in June 2003 that 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. The bilateral FTA has inaugurated greatly expanded U.S.-Chilean trade ties, with total bilateral trade jumping by 154% during the FTA’s first three years.
Chile unilaterally lowered its across-the-board import tariff for all countries with which it does not have a trade agreement to 6% in 2003. Higher effective tariffs are charged only on imports of wheat, wheat flour, and sugar as a result of a system of import price bands. The price bands were ruled inconsistent with Chile's World Trade Organization (WTO) obligations in 2002, and the government has introduced legislation to modify them. Under the terms of the U.S.-Chile FTA, the price bands will be completely phased out for U.S. imports of wheat, wheat flour, and sugar within 12 years.
Chile is a strong proponent of pressing ahead on negotiations for a Free Trade Area of the Americas (FTAA) and is active in the WTO’s Doha round of negotiations, principally through its membership in the G-20 and Cairns Group.
Since its return to democracy in 1990, Chile has been an active participant in the international political arena. Chile completed a 2-year non-permanent position on the UN Security Council in January 2005. Jose Miguel Insulza, a Chilean national, was elected Secretary General of the Organization of American States in May 2005. Chile is an active member of the UN family of agencies and participates in UN peacekeeping activities. Chile hosted the Defense Ministerial of the Americas in 2002 and the APEC summit and related meetings in 2004. Chile hosted the Community of Democracies ministerial in April 2005. An associate member of Mercosur and a full member of APEC, Chile has been an important actor on international economic issues and hemispheric free trade.
The Chilean Government has diplomatic relations with most countries. It settled its territorial disputes 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 and are represented at the Consul General level.
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. Besides the landmark 2003 U.S.-Chile FTA, the two governments consult frequently on issues of mutual concern, including in the areas of multilateral diplomacy, security, culture, and science.
U.S. Embassy Functions
The Public Affairs Section cooperates with universities and non-governmental organizations (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 trade, international security, democratic governance in the region, judicial reform, law enforcement, environmental issues, and the teaching of English. The Public Affairs Section 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.
Attachés 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 who 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. It assists Americans who wish to vote in U.S. elections while abroad, provides U.S. tax information, and facilitates government benefits/social security payments. Besides those U.S. citizens resident in Chile, about 170,000 U.S. citizens visit Chile annually. The Consular Section offers passport and emergency services to U.S. tourists during their stay in Chile. It also issues about 40,000 visitor visas annually to Chilean citizens who plan to travel to the United States.
Principal U.S. Embassy Officials
The U.S. Embassy and Consulate in Santiago are located at 2800 Andres Bello Avenue, Las Condes, (tel. 562-330-3000; fax: 562-330-3710). The mailing address is Casilla 27-D, Santiago, Chile.
Other Contact Information
Comite de Inversiones Extranjeras (Foreign Investment Committee)
TRAVEL AND BUSINESS INFORMATION
For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Public Announcements, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.
The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.
Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.
The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.
Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.
Further Electronic Information
Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.
Revised: Apr. 2007