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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

GOVERNMENT1927- General Carlos Ibanez del Campo became president in the 1927

election

His reign was based on:

MILITARY SUPPORT(ARMY)- created national police

known as Carabineros

REPRESSION- of labour

unions, leftists, political parties

LOANS FROM PRIVATE

LENDERS- especially in

New York

GOVERNMENT

However, when the Depression came..

Why he remained in office

Economy was doing well

Military Intervention

Promoted industry,

public work

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

Nitrate

80% of government revenue

¼ of GDP

Expor

t of:

CROP DIVERSITYTechnological advancements means synthetic substitutes for natural resources like nitrate

Primary industry leaves little room for domestic market

Problems with Nitrate/Copper

Reliance

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

• 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

COPPER MINING

• 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