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CHILE ON THE MAP
THE GOVERNMENT
GOVERNMENT
Background Information:
In the 1920s, Chileans were experiencing economic prosperity
with power emerging to the middle and working class
1925- a new constitution was drafted; second major charter
in Chilean history
Significant changes: official separation of church and state,
legal recognition of worker’s right to organize, promise to
care for social welfare of all citizens, right of state to
infringe on private property for public good and increased
powers for the now directly elected president
GOVERNMENT
1927- General Carlos Ibanez del Campo became president in the 1927 election
His reign was based on:
created national
police known as
Carabineros
of
labour unions,
leftists, political
parties
especially in New
York
GOVERNMENT
Military
Intervention
Promoted
industry,
public work
Economy
was doing
well
However, when the Depression came..
Why he remained in office
GOVERNMENT
Government revenues plummeted, deficits grew
Chile suspended payments on its foreign debt in 1931 and took its currency off the
gold standard in 1932
In fear of a civil war, Ibáñez went into exile in Argentina in July 1931
GOVERNMENT
After Ibáñez, Alessandri was voted back into office in 1932 and would remain until
1938
Dealing with the Depression
 Created COVENSA (Corporation of
Nitrate and Iodine Sale)
 New taxes, focused on public works ie: construction of National Stadium in
Santiago in 1938
1938- Communists, Socialists and Radicals formed Popular Front coalition and
introduced economic polices based on US New Deal
CROP DIVERSITY
Copper
80% of
government
revenue
Nitrate
¼ of
GDP
CROP DIVERSITY
Depends on demand of foreign market
Technological advancements means
synthetic substitutes for natural
resources like nitrate
Problems with
Nitrate/Copper
Reliance
Primary industry leaves little room for
domestic market
CHILE’S INDUSTRIES
INDUSTRIES
Economy has been sustained by mining for centuries
Two main minerals:
- Nitrates  iodine is a by product
- Copper
Value of nitrate exports:
1884  67 000 000 pesos
1913  315 000 000 pesos
During WW1 the nitrate industry declined and eventually collapsed
 demand lowered b/c Germany invented synthetic substitutes
 British naval blockade closed the market
COPPER MINING
Has world’s largest copper
reserves
• When nitrate industry
collapsed copper replaced it
as Chile’s leading export
• Known as “Chile’s salary”
• Demand for copper gave
Chile an advantage over
other nations BUT put it at
the mercy of the international
market
 when copper prices fell or
Europe was in economic
downfall, Chile felt it too
•
Chuquicamata
largest copper mine
•
1890 – 1910  nitrate industry was increasing while the copper industry was
decreasing
•
Rehabilitation of copper industry was at the hands of foreign investors
•
Investments from North American businesses helped the Chilean copper industry
turn around
 Kennecott Copper Company – 1911
 Anaconda Copper Company – 1922
PREWAR AND WARTIME EXPORTS
NITRATES AND IODINE
COPPER
1910-13
86%
8%
1915-20
74.6%
17.3%
Difference
11.4% - decrease
9.3% - increase
TRADING PARTNERS?
TRADING PARTNERS
• depended too much on foreign markets
• the combination of export taxes and workers’
salaries  50% of the value of production
remained in Chile
TRADING PARTNERS
Chile  Foreign Sector:
Minerals
Europe & United States as
Foreign Investors
If investing countries were
affected, Chile’s economy
would be affected as well
TRADING PARTNERS
Spain  Chile's main exports were minerals (silver and copper before 1879,
and nitrate after the Pacific War)
Mid- 19th Century  agricultural products exported mainly to Australia and
California
TRADING PARTNERS
• Chile’s trading  signs of collapsing with the
invention of artificial nitrate, which replaced natural
nitrate due to its lower price.
E.g. Post- WW1, nations that traded w/ Germany or sent supplies
to them go no longer do so as Allies placed a blockade
CLASS STRUCTURES
• B/w 1891 and 1925, Chile’s population grew by 61%
from 2,600,000 to 4,200,000
• The percentage of people living in cities
grew 20 – 30 %
• The advance of the middle class depended on the
growth of educational institutions; by 1920, nearly
50% of the population was literate
THE DEPRESSION IN CHILE
HOW HARD WAS IT HIT?
•
The UN declared Chile, the country in South America to be hit hardest by
the Great Depression.
• WHY?
 80% of government revenue came from exports of copper and nitrates,
which were in low demand during the depression
 nitrates industry and copper mining were one of the main industries and
during the great depression the demand for these products decreased
substantially.
 Led to complete collapse of national economy
• GDP dropped 14%
• mining income declined 27%
• export earnings fell 28%
• By 1932 GDP had shrunk to less than half of what it had been in
1929
• Had a huge impact on unemployment and business failures.
• the collapse of international prices had had negative consequences
on the levels of import and exports, foreign loans, etc.
• By mid 1931 – Chile was no longer able to make their payments to
cover their debt.
GREAT DEPRESSION’S EFFECT ON THE PEOPLE
•
Students and youth, started to believe or lean towards a more sift side government,
more communist in order to achieve an equal and more balanced economy
Had a devastating impact on the living and working conditions of the majority of Chilean
people
 The most immediate consequences were the unemployment, job insecurity and the
decline of wages.
•
•
There was an inflation in the cost of things – everyday items such as soap – prices were
raised
High rates of inflation – things were more expensive – living costs increased while
wages declined
• Did not help the people in recovering from situation
•
NORTHERN REGIONS
•
Northern mining districts - families struggled from hunger and poverty
•
Depression hit the mining regions more severely, where the nitrate and copper
workers were the backbone of the Chilean economy
HOW DID IT GET OUT OF DEPRESSION?
• Import Substitution Indutrialization  encourage
domestic industries to lessen dependence on foreign
manufactured goods
• Mining wasn’t as hard hit as the industrial sectors, so
it contributed in bringing recovery
• WW2 also brought about recovery b/c it increased in
the demand for copper
• Increased intervention in the economy
BIBLIOGRAPHY
http://news.bbc.co.uk/2/hi/americas/1222905.stm
http://motherearthtravel.com/history/chile/history-9.htm
http://countrystudies.us/chile/57.htm