Neoliberal Chile: A Sketch

Robert J. Lavigna

“The State does not demand justice of its members, but thinks that it succeeds very well with the least degree of it, hardly more than rogues practice.”

Henry David Thoreau

     To better appreciate the blunt realities of “globalization,” one has only to consider the case of Chile and the figure of Augusto Pinochet Ugarte, the military dictator who ruled there from 1973 to 1990. The story of Pinochet’s rise to power, the brutality and legacy of his authoritarian regime, and his impardonable escape from justice are emblematic of the neoliberal trend to undermine democratic institutions in the sole interest of financial gain.

The Chilean “Economic Miracle”

     Chile, the country where “neoliberal” economic theories were first applied, is hailed as an exemplary success of free-market policies. But a closer look at the oft-celebrated Chilean “Economic Miracle” reveals an ideal case study of free-market failure, the indices of which are common of neoliberal practice today: an increase in poverty; an increase in the gap between the rich and the poor; the reduction of social services; the dismantling or weakening of unionized labor; the predominance of “flexible labor” schemes, i.e., short-term, low or no-benefit contracts; huge foreign debt; and wide-ranging environmental degradation.

     Proponents of neoliberalism cite Chile’s high growth and low unemployment rates as proof of the “miracle,” but these statistics are misleading. Between 1973 and 1986—the better part of Pinochet’s dictatorship—there was no economic growth.(1) Averaged out over the seventeen years of his regime, Chile’s growth was actually one of the slowest among Latin American countries.(2) The Chilean economy has expanded by an average of 7% a year since 1986, but this growth is based mainly on the export of non-renewable natural resources and derivative manufactures, or concentrated in non-productive sectors like marketing and financial services. Dr. Róbinson Rojas, an expert on Chile, asserts that “competitive markets can make a ‘miracle’ unsustainable because of the destruction of the environment as a sequel to maximization of profits.(3)

     In 1972, the year before Pinochet seized power, unemployment was as low as 3.1%; over the course of his dictatorship it averaged 14%.(4) Although the unemployment rate is now around 5-6%, the improvement has come in the recovery from a steep recession, and many of the new jobs created are poorly-paid and unstable. Over 45% of the labor force is employed by microempresas (micro-enterprises), which hire out services to conglomerates or the industrial sector.(5) The owners of these businesses must rely on temporary contracts from investment companies called AFPs (Associations of Provisional Funds), which are controlled by the ten richest families in Chile. Because microempresa owners are at the mercy of AFPs, they cannot offer their workers permanent contracts, and the salaries they pay are barely above subsistence level.

     The profile of Chile’s wealth distribution—one of the world’s worst, according to a 1997 World Bank report—is evidence of the neoliberal fallacy that economic growth will eventually benefit all classes of society. In 1969, 28.5% of the population lived in poverty; by the end of the dictatorship, that figure had climbed to 42%.(6) Today, poverty still afflicts one-fourth of the population.(7) Real salaries (after adjusting for inflation) are 18% lower than they were during Salvador Allende’s administration, with a third of the nation earning less than \$30 a week.(8) Meanwhile, the top 10% of the population earns nearly half the country’s wealth.(9)

     As the first offspring of neoliberal modernization, Chile has one of the highest foreign debts in the world—in 2000 it topped a staggering \$35 billion.(10) Much of the capital borrowed from or invested by foreign institutions is not used for development of the domestic economy, but rather for financial speculation—money that never reaches or serves the lower income groups. Additionally, because many of Chile’s industries are foreign-owned, profits from those industries are sent back overseas. When the economy crashed in the early 1980’s, the International Monetary Fund (IMF) offered Chile bailout loans, but in return Chile had to guarantee its entire foreign debt, a burden that was passed on to the taxpayers.

     Market deregulation, which implies a reduction or elimination of industrial or environmental controls, has led to Chile’s status as one of the most polluted countries in South America. Some 150 Santiago factories exceed by one hundredfold the recommended levels of pollution emissions.(11) The air quality is so bad that hospitals in the capital city receive over 2,700 infants a day requiring oxygen masks.(12) Santiago’s tap water contains dangerous levels of copper, iron, magnesium and lead.(13) At current rates of extraction, Chile’s native forests are estimated to disappear by the year 2025.(14)

     Sara Larrain, coordinator of Chile’s National Network for Ecological Action, attests that the neoliberal experiment in her country has been anything but miraculous. “Because it has averaged 6 percent growth over the past 12 years, Chile is being presented to Latin America and the rest of the world by the World Bank, the IMF and others as the current poster child of export-led growth—the Latin American Tiger economy—an example of the proper way to govern people, build democracy, use natural resources, and be a successful competitor in the global economy. It is an image without reality, like a Hollywood movie set. Behind the facade our reality is one of poverty, human suffering, systematic environmental destruction, and authoritarianism.”(15)

U.S. Complicity

     Although the story is not new, the U.S. role in the Chilean free-market experiment cannot be overstated, because U.S. economic power is the locomotive of the neoliberal impulse today. Twenty-seven years ago, the neoliberal model was imposed on Chile in the wake of U.S. covert actions that prompted the violent overthrow of Salvador Allende’s democratically-elected government. Recently declassified U.S. intelligence records detail how the C.I.A. and the Nixon administration worked to strangle Chile’s economy, disrupt Allende’s Popular Unity government and goad the Chilean armed forces into staging the coup.

     Chile had emerged from the post-colonial period as the most stable democracy in Latin America, developing a tradition of political plurality and a high level of social consciousness and commitment. It was, nonetheless, heavily dependent on U.S. capital. American transnationals held monopolies in Chilean copper (Chile’s most profitable export) and telecommunications, along with a large share of the manufacturing sector. The Popular Unity viewed this dependence as a barrier to social and economic development, and proposed a “parliamentary path to socialism” to free Chile of foreign domination. Their program included increased participation of workers and peasants in policy making, the redistribution of agricultural estates, the recovery of natural resources from foreign control, and the nationalization of the financial system. These measures aimed to create a more equitable society benefitting all Chileans and achieve genuine national independence.

     However, from the standpoint of U.S. foreign policy, a democratically-elected socialist President in Latin America was a threat to U.S. prestige, and therefore was unacceptable. The Nixon administration harassed Salvador Allende from the rise of his Popular Unity coalition up to the day of his death. To help monitor the 1970 election, nearly one-third of the U.S. Embassy staff in Santiago were on the C.I.A. payroll—a staff later marked by its indifference to the safety of U.S. nationals after the coup.(16) With C.I.A. guidance, U.S. corporations IT&T, Anaconda and Kennecott all conspired to keep Allende out of office, funding campaign opponents or acts of sabotage against the Chilean infrastructure.

     In spite of these efforts, Allende won the election, but his narrow victory had to be ratified by the Chilean Congress. Nixon then ordered the C.I.A. to devise a plan to block his inauguration. The agency spent \$350,000 to buy off Christian Democrats in the congress, and pressured outgoing president Eduardo Frei with bribes and propaganda to nullify the election results.(17) At the same time, the C.I.A. was working to induce a military coup. On October 22, 1970, gunmen ambushed and mortally wounded General René Schneider, Commander-in-Chief of the Chilean Armed Forces, who had vowed to remain loyal to the Constitution and honor Allende’s democratic election. The weapons and ammunition used in the assault had been collected from the military attaché at the U.S. Embassy in Santiago. Then-National Security Advisor Henry Kissinger denied foreknowledge of the attack, but a declassified memorandum from the period sheds doubt on his claim: “Dr. Kissinger discussed his desire that the word of our encouragement to the Chilean military in recent weeks be kept as secret as possible.”(18)

     After Allende’s election was ratified, the Nixon administration strove to tarnish diplomatic relations between the Popular Unity and foreign governments, and implemented a secret economic boycott intended to make the Chilean economy “scream.” The U.S. ambassador to Chile, Edward Korry, declared, “Not a nut or a bolt will reach Chile... We will do all in our power to condemn Chileans to utmost poverty.”(19) U.S. banks including Chase Manhattan, Chemical, First National City, Manufacturers Hanover, and Morgan Guaranty all cancelled credits to Chile.(20) On Nixon’s instructions, the World Bank, Inter-American Development Bank, Agency for International Development, and Export-Import Bank either cut programs in Chile or cancelled credits.(21) However, Washington decided it was appropriate to continue military aid, which doubled in the period 1970-1974 compared to the previous four years.(22)

     At the same time, the C.I.A. maintained its pressure to incite a military coup. As part of a “black” propaganda blitz, it poured \$1.6 million into Chile’s top media group, El Mercurio, and circulated stories purporting a leftist takeover of the military.(23) The C.I.A. also bankrolled labor strikes in 1972 and 1973 to aggravate economic and social chaos. Money was not their only weapon. Fred Landis, an independent researcher who spent time in Chile after the coup, accuses the C.I.A. of “blowing up bridges, railway lines, and killing people” just prior to the overthrow.(24)

     Finally, the pressure succeeded. The Chilean military attacked on September 11, 1973, led by General Pinochet, whom a month earlier Allende had appointed as Commander-in-Chief entrusted to preserve the loyalty of the armed forces. The presidential palace, La Moneda, was bombed and Allende was killed in the raid. Nixon and his senior officials celebrated the coup, but shrugged off the deaths of two American citizens, Charles Horman and Frank Terruggi, who were executed at the National Stadium in Santiago. One cable dated Oct. 21, 1973 summed up the executions as a “difficult public relations situation.(25) Further documentary evidence implicates the C.I.A. in the murders.

     As soon as Pinochet was in power, the Nixon administration lifted the clandestine economic boycott. The same U.S. banks that had cut off the Popular Unity authorized hundreds of millions of dollars in loans to the new regime, and institutions like the World Bank and IMF happily refinanced Chile’s foreign debt. As reports of the regime’s horrors began to surface in the world press, the C.I.A. ran propaganda campaigns to dress up the Junta’s image, both internally and abroad. Declassified documents confirm that Kissinger withheld information about the human rights abuses and allayed Pinochet’s fears about potential U.S. sanctions. In a meeting in 1976, then-Secretary of State Kissinger told Pinochet, “In the United States,... we sympathize with what you are trying to do here... I wish you the best.(26)

     Up to now the C.I.A. has been largely uncooperative with the declassification project, having released only a small portion of their files on U.S. covert operations in Chile. Apart from a desire to protect individual reputations, it is difficult to understand their reluctance. The details that have come to light illustrate U.S. influence in the control of capital to punish or reward foreign governments, and Washington’s brazen abuse of national sovereignty to impose or preserve the neoliberal model. Regardless of the Popular Unity’s own flaws and mistakes, the U.S. robbed it of the chance to succeed, a chance it had rightfully earned through a democratic election.

The Human Rights Abuses

     As U.S.-backed despot, Pinochet let his technocrats manage the economy so he could focus on the work of maintaining “law and order,” “setting examples” and “defending Christian values.” In the process, the general and his military thugs methodically wasted the nation’s most valuable resource: its people. The report by the National Commission for Truth and Reconciliation, established by President Patricio Alywin in 1990 to investigate human rights violations during the regime, cites 3,197 as the number of individuals murdered or “disappeared” as a result of Pinochet’s repression;(27) other sources place the figure as high as 30,000.(28) The actual number is impossible to ascertain, as many witnesses and family members were afraid to testify before the Commission. According to Amnesty International and the United Nations’ Human Rights Committee, 250,000 Chileans were arrested for political reasons by the end of 1973 alone.(29) An estimated 200,000 people were tortured,(30) and 408,000 Chileans—roughly five percent of the population—were forced into exile abroad.(31) Champions of the prevailing system consider this “a small price to pay” for Chile’s entry into the global market.

     Among those targeted for repression were political opponents, union leaders and members, agrarian reform leaders, indigenous peoples, cultural figures, professors, intellectuals, students, military personnel, human rights activists, church officials, members of victim support groups, and the family and friends of people belonging to these groups. Victor Jara, the world-renown Chilean folk singer, used to say that an artist was more dangerous than a guerrilla. The military Junta apparently agreed, arresting him a few days after the overthrow. Because he was a musician, his hands and wrists were smashed. He was savagely beaten and electrocuted for four days before being machine-gunned to death.

     On September 21st, 1973, under the pretext of civil war, military units embarked on an operation called the Caravan of Death, ranging the northern provinces to hunt down and execute rural leaders and anyone suspected or accused of harboring left-wing sympathies. Many of the victims were prisoners who had surrendered to the military immediately following the coup.

     The death squads made no distinction between men and women, elderly or young. Sixty-two percent of all victims of repression were between the ages of 16 and 30, and at least 80 children aged 15 or younger were summarily shot or died as a consequence of military violence.(32) The Junta was distinguished in its penchant for savagery against the unarmed populace. The streets of Santiago’s working-class neighborhoods accumulated bodies that “generally had fingernails pulled out, or legs broken, or testicles smashed. Several had their eyes burnt out, apparently with cigarette butts.(33) When family members ventured out to recover their dead, they were arrested. Such was the extent of the carnage that the Arauco Fishing Association, a cannery based in the port of Talcahuano, had to dicontinue operations for several days in the fall of 1973. The fish they were processing were full of pieces of human flesh from corpses the Navy had dumped into the ocean after they were removed from the naval base’s torture facilities.(34)

     As outlined in the report by the National Committee on Truth and Reconciliation, the following methods of torture were among those used on prisoners: “Roasting,” in which the victim, male or female, was strapped naked onto a metal bed and given electric shocks to the genitals; “Telephone,” severe beatings in which the victim’s eardrums were intentionally ruptured; burning, with cigarettes or open flame; mock executions; suffocation, including the immersion of the victim’s head into buckets filled with water or excrement; the insertion of iron objects into the victim’s anus; the insertion of mice into female prisoners’ vaginas; individual or gang rape of female prisoners; and the rape of female prisoners by specially-trained dogs, often in the presence of husbands and children who were forced to watch. All of these methods were approved by Augusto Pinochet.(35)

     The Junta’s repression was not confined to Chilean territory. Operation Condor, an international terrorist program created by Colonel Manuel Contreras, chief of Pinochet’s secret police force, assassinated or made attempts against opponents of the regime in Italy, Argentina and the United States. Last year the U.S. Justice Department reopened a grand jury investigation implicating Pinochet in the car-bombing murder of former Allende minister Orlando Letelier and his American assistant Ronni Moffit in Washington D.C. on September 21st, 1976. In 1995, Contreras was sentenced by the Chilean courts to 7 years in prison for his role in the murders. Contreras testified in his defense that he received orders directly and exclusively from Augusto Pinochet.

The Aftermath

     Pinochet turned over the government to civilian rule in 1989, but not before securing the status quo and right-wing privilege and power. His “protected democracy” is the product of the 1980 Constitution, which was drawn up to benefit the junta and approved by a rigged plebiscite. When he retired from the army in March 1998, he assumed the seat of Senator for Life, a post he had written into the 1980 Constitution, awarding himself the permanent right to political veto. Chile’s transition to democracy has since limped along in the cold of his shadow like a wounded animal, while the society he left in place remains stunted by his reign of terror and defaced by the neoliberal precept of “consume or be consumed.”

     The repression of Pinochet’s regime had far-reaching effects on all strata of Chilean society. Research by Chilean psychologists, human rights activists and victim aid organizations classifies victims into two categories: direct victims and indirect victims. Direct victims include individuals who were arrested, kidnapped, tortured, forced into exile or forced to disappear, along with the entire family group of the individual involved. Indirect victims are children who are born into this family group, as they are affected by changing familial relationships that result from the stress or anxiety suffered within the group.

     Studies on the effects of Pinochet’s regime on Chilean society highlight the use of intimidation to control the people. Elizabeth Lira and Isabel Castillo, researchers from the Latin American Institute on Mental Health and Human Rights, observe: “The entire Chilean society is transformed into victims by the threatening tone of the official language used by the regime, which materializes in repressive actions which are legitimized by decreed laws... One hears the silence of fear in the subway stations and other places where many people congregate and which were always noisy in the past... No one whistles, no one hums a tune, no arguments are heard. One sees the fear in the fleeting glances, in the controlled gestures, ... in exaggerated courtesy...”(36)

     It is this use of intimidation, of playing on people’s fears, that resulted in a third category of victims: those who suffer what Chilean sociologist Tomás Moulian calls “The Great Psychotic Denial.”(37) These are individuals who refuse to acknowledge that human rights abuses ever occurred, similar to Holocaust revisionists who claim that Nazi concentration camps never existed. Their position is based on evidence such as “I never saw any murders” or “That’s what people outside Chile say happened, but they’re liars.” Following the philosophy of “out of sight, out of mind,” the regime nurtured the collective amnesia by altering the physical environs, whitewashing walls and changing placenames to obliterate all vestiges of the Allende era.

     The free-market economy has significantly altered social relations in Chile. Because of the change in work patterns, people spend less time with their families. The focal point of social activity has shifted from the neighborhood to the workplace; from relationships within the community to those with clients and creditors. Civic spirit and concern for the common good have been supplanted by the neoliberal emphasis on competition and the individual. Chilean economist Jaime Vargas boasts, “People know the rules of the game and have to believe in themselves. People are not into politics and not into groups of any kind—unions, clubs, whatever.”(38) Chilean workers have never recovered from Pinochet’s crackdown on labor organization. In 1972, 41% of the workforce was unionized;(39) today that figure is less than 10%.(40) Cathy Schneider, a researcher on Chile, asserts that “the fragmentation of the opposition communities... has transformed Chile, both culturally and politically, from a country of active, participatory grassroots communities, to a land of disconnected, apolitical individuals.”(41)

     In addition to political apathy, neoliberal reform has promoted the rise of materialism, passing off market freedom as human freedom. The Nation correspondent Marc Cooper affirms, “In Chile, mass credit consumerism substitutes for development. Worse, before 1973, conspicuous consumption was taboo in a country still infused with a sense of social solidarity.”(42) WonderBras and Air Jordans are purchased on twelve-month installment plans, while potatoes and cabbage are charged with Diner’s Club cards. Keeping in step with corporate culture, Chileans have canonized the concept of image. Motorists drive around speaking into toy replicas of mobile phones; millworkers affix Velcro insignias of elite academies to their children’s school uniforms; poshly-dressed shoppers fill their carts with luxury items, wheel them around the supermarket, then ditch them before reaching the checkout counter. In light of these examples, it is hardly a surprise that Pinochet himself has an “Image Committee” working on his behalf.

     After eleven years of civilian rule, Chile remains a bitterly divided country. While two-thirds of the population detests the former dictator as the most notorious traitor in Chilean history, a man who openly prides himself on his deceit and cruelty, jokes about his victims and describes himself a “gentleman,” the other third still adulates him. This third controls the economic power, the mainstream media and the Armed Forces. Among its ranks are those who snort at the mention of human rights, curse the survivors of Pinochet’s repression and lament that he didn’t kill them all. Chilean writer Ariel Dorfman states, “Chile is a fractured nation where the distance between the inconsolable sadness of the victims and the blind arrogance of their persecutors seems unbridgeable.”(43)

The London-town Sham

     Senator-for-Life Pinochet kept on laughing about his crimes until October 16th, 1998, when he was arrested in London at the request of Spanish Judge Baltasar Garzón, who sought his extradition on charges of human rights abuses. The former dictator had travelled to England a month earlier to treat a herniated disc, talk with U.K. arms suppliers and visit his friend Margaret Thatcher. The Chilean government and Pinochet supporters angrily protested his detention, claiming it was an incursion on national sovereignty and a potential setback to the process of reconciliación in the post-dictatorship era. For the loved ones of the murdered and disappeared, it was their first real hope in twenty-five years of intimidation, ridicule and sorrow that Pinochet would be brought to justice.

     Pinochet’s fate lay with the British courts and the U.K. Home Office Secretary, Jack Straw, who under U.K. law has the final word on the extradition of accused individuals. A protracted legal battle was fought to determine whether Pinochet as a former head of state had sovereign immunity to prosecution. At the same time, France, Belgium and Switzerland also filed warrants for his extradition. On March 24th, 1999, in a historic precedent for international law, the courts stripped Pinochet of his immunity, and three weeks later, Home Secretary Straw issued an authorization to go forward with the process.

     That summer, while the ex-dictator was roughing out house arrest in a Surrey mansion, the press began to leak reports of secret negotiations between the governments of Chile, Spain and Britain to prevent Pinochet’s extradition. The Foreign Ministers of Chile and Spain denied the accusations. However, The Independent revealed in August that the Home Office had received legal advice on how to free Pinochet on humanitarian grounds. On October 8th, 1999, the extradition hearing ended with British Magistrate Ronald Bartle’s ruling that Pinochet had to face justice in Spain, pending Jack Straw’s final decision.

     Shortly after Bartle’s ruling, the Chilean Foreign Ministry sent the Home Office medical records backing the claim that the general’s health had deteriorated. Exercising his ample discretionary powers as Home Secretary, Straw then requested Pinochet to undergo a medical exam by an “independent” team of doctors he himself assigned for the task. The exam was carried out on January 5th, 2000, and six days later, Straw announced the results: although the details of the medical report were to remain confidential, the doctors had reached the “unequivocal and unanimous” conclusion that Pinochet was unfit to stand trial, and that no change in his condition could be expected. On the basis of these results, Straw said he was “minded” to suspend the extradition process.

     However, on February 15th, 2000, a High Court ruling ordered Straw to disclose the medical report to the four countries involved. The report indicated that Pinochet was suffering brain damage. Court-appointed Spanish doctors rejected it as “absurd, surreal, incoherent and untrustworthy,” and described the British medical team’s treatment of Pinochet’s condition as “frivolous.”(44) Their own conclusion was that Pinochet’s health was not an impediment to standing trial. Belgian and French specialists who studied the report concurred with this view. All four processing countries called for a new medical exam, but on March 2nd, 2000, Straw announced before the British Parliament his decision to release Pinochet.

     The very day Pinochet departed from England, The Independent published the story of a deal arranged by Santiago, London and Madrid to free the former dictator and thus avert the political repercussions of a trial on Spanish soil. Pinochet’s arrest was an embarrassment for both the British and Spanish governments, neither of which wanted to see him tried in Madrid. Conservative MPs whined about the Chilean defense contracts they had lost, the huge bill the legal proceedings had run up for taxpayers, and the scandal of having “kidnapped” a “true friend” of the U.K. Spain, for its part, is Chile’s biggest foreign investor, and Spanish President José-Maria Aznar was worried about protecting his country’s interests there. As such, the highly-disputed medical exam—by Straw’s own admission the only factor which changed his mind—was exposed as a fraud. Adding insult to injury, Straw warned just two days after Pinochet’s return to Chile that the general’s health might suddenly improve.


     Although the legal trailblazing of Baltasar Garzón did not come to fruition in Madrid, it has emboldened Chilean democracy to pick up where his process was unduly cut short. Chilean judge Juan Guzmán has managed to place Augusto Pinochet under house arrest for his role in the Caravan of Death, and is investigating over two hundred charges of human rights abuses currently filed against him. But the movement to try the ex-dictator in his own country has struggled against the intransigence and pressure of the old guard. Pinochet’s defenders want to proceed on the assumption of a clean slate, content to sweep the facts of history under the carpet like so many mutilated corpses into mass graves. The sentiment of those who seek justice is captured in the declaration of Chilean writer Isabel Allende: “Only when Chile knows the full truth about the overthrow and Pinochet’s regime can there be a national reconciliation.”(45)

     The maladies of neoliberalism witnessed in Chile since 1973 have turned out to be recurring problems. The “free market” does not eradicate poverty but in fact exacerbates it, concentrating wealth into the hands of a few at the expense of the majority. The laissez-faire nature of neoliberal economics reduces the state’s role in meeting the basic needs of society, demanding its members to adapt to the dictates of the market. In their manic drive to accumulate profit, corporations exploit labor and natural resources, measuring personhood only by one’s capacity to consume. When big business is at stake, national leaders kowtow before financial overlords, relegating the issue of human rights to second-class status. And to implement or maintain the model, neoliberalites are not above the use of violence.

     But in Chile, as in the rest of the world, there are people who are actively opposed to neoliberal capitalism. Their aspirations recall the final address of fallen president Salvador Allende, who delivered a message of hope when he knew the end was at hand: “I have faith in Chile and in her destiny... You must go on, knowing that sooner rather than later the grand avenues will open along which free people will pass to build a better society. My sacrifice will not be in vain. I am certain that it will at least serve as a moral lesson which will punish felony, cowardice and treason.”(46)

Web sites of interest:
Robinson Rojas Databank about Chile:
Derechos Chile:
Remember-Chile: <>
The Crimes of Augusto Pinochet: <>


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