In 1973 the military overthrew constitutionally elected President Salvador Allende, imposed a dictatorship, and ruled the country until 1990. Basic human rights were abused, the country went through a period of marked international isolation, and the Augusto Pinochet regime transformed the economy into one based on a free market model.
A Military Junta took control of the country on 11 September 1973. It was comprised of the commanders in chief of the four branches of the armed forces, though Augusto Pinochet was the one to exercise power in practice. Some of the first measures taken by the dictatorial regime were the closure of the National Congress, the prohibition of political parties and press censorship.
Over 3,000 people were executed or made to disappear, thousands had to go into exile, universities and work centers were intervened or put under surveillance. The systematic violation of human rights at the hands of the intelligence services even reached Chileans overseas. Salvador Allende’s former foreign minister Orlando Letelier and former Army commander in chief General Carlos Prats were murdered in Washington and Buenos Aires, respectively.
On the economic plane, the dictatorship undertook a transformation based on University of Chicago economist Milton Friedman’s economic model.
Through a reduction in social spending, the privatization of companies, and the promotion of exports, the Pinochet regime implemented market system reforms.
The economy began to show signs of expansion in 1976, when credit was expanded, indebtedness in the private financial sector increased, and, to control inflation, a fixed exchange rate was introduced. The international economic crisis of 1982 paralyzed loans to Latin America and Chile was severely battered. GDP dropped 15% in the second half of that year; the government devalued the peso and put an end to the fixed interest rate. Unemployment reached 25% and poverty affected 40% of the population.
Social protests escalated and the movement against the dictatorship became organized under the Democratic Alliance. With a politically weakened government, the economy began to recover in 1985 and grew at an annual average of 7% until 1990. The economic model was studied by international experts and aroused interest in other countries, but poverty rates continued above 40%.
The 1988 plebiscite
According to the provisions of the Political Constitution drafted by the military regime in 1980, a plebiscite was to be held in 1988 to vote on whether or not Pinochet was to continue in the government for another 8 years. If this was rejected then there was an obligation to hold free elections a year later. The NO vote won a majority in the plebiscite and in 1989 the Christian Democrat Patricio Aylwin was elected president with 55% of the vote.