Chile: Political and Economic Conditions and
U.S. Relations
Peter J. Meyer
Analyst in Latin American Affairs
March 2, 2010
Congressional Research Service
7-5700
www.crs.gov
R40126
CRS Report for Congress
P
repared for Members and Committees of Congress
Chile: Political and Economic Conditions and U.S. Relations
Summary
Following a violent coup against democratically elected Marxist President Salvador Allende in
1973, Chile experienced 17 years of military rule under General Augusto Pinochet before
reestablishing democratic rule in 1990. A center-left coalition of parties known as the
Concertación has governed Chile over the two decades since the end of the dictatorship. In
addition to addressing human rights violations from the Pinochet era, the coalition has enacted a
number of constitutional changes designed to strengthen civilian democracy. Chile has made
significant economic progress under the Concertación’s free market economic policies and
moderate social programs, which have produced notable economic growth and considerable
reductions in poverty.
Current President Michelle Bachelet enjoys widespread popular support despite having faced a
number of challenges since taking office in 2006. Throughout her term, Bachelet has been
confronted by student demonstrations against the education system, increased militancy by
indigenous groups, and opposition in the legislature. The global financial crisis is President
Bachelet’s latest challenge, though the government’s timely decision to save recent fiscal
surpluses has allowed Chile to pursue counter-cyclical policies and minimize the effects of the
economic downturn.
On January 17, 2010, Sebastián Piñera of the center-right Alianza coalition was elected president
in a second-round runoff vote, defeating former President Eduardo Frei (1994-2000) of the
Concertación. Piñera’s election was the first for the Chilean right since 1958, and will bring an
end to 20 years of Concertación governance. Throughout his campaign, Piñera pledged to largely
maintain Chile’s social safety net while implementing policies designed to boost the country’s
economic growth. He will need to work with the Concertación to enact his policy agenda,
however, as his coalition will not enjoy absolute majorities in either house of Congress. Piñera is
scheduled to take office on March 11, 2010.
Chile has enjoyed close relations with the United States since its transition back to democracy.
Both countries have emphasized similar priorities in the region, designed to strengthen
democracy, improve human rights, and advance free trade. Chile and the United States have also
maintained strong commercial ties, which have become more extensive since a bilateral free trade
agreement between them entered into force in 2004. Additionally, U.S. officials have expressed
appreciation for Chile’s leadership and moderating influence in a region increasingly
characterized by political unrest and anti-American populism.
This report provides a brief historical background of Chile, examines recent political and
economic developments, and addresses issues in U.S.-Chilean relations.
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Chile: Political and Economic Conditions and U.S. Relations
Contents
February 27, 2010, Earthquake.................................................................................................... 1
Current Conditions................................................................................................................ 1
Chilean Government Response.............................................................................................. 1
Political and Economic Background............................................................................................ 2
Independence through Allende .............................................................................................. 2
Pinochet Era.......................................................................................................................... 3
Return to Democracy ............................................................................................................ 4
Recent Political and Economic Developments ............................................................................. 5
Bachelet Administration........................................................................................................5
Education Demonstrations............................................................................................... 6
Mapuche Activism .......................................................................................................... 6
Loss of Legislative Control ............................................................................................. 7
Global Financial Crisis.................................................................................................... 8
2009 Presidential and Legislative Elections ........................................................................... 9
Results ............................................................................................................................ 9
Prospects for the Piñera Administration......................................................................... 10
Human Rights ..................................................................................................................... 11
Energy Challenges .............................................................................................................. 12
Chile-U.S. Relations ................................................................................................................. 13
U.S. Assistance ................................................................................................................... 13
Free Trade Agreement ......................................................................................................... 14
Regional Leadership ........................................................................................................... 14
Narcotics and Human Trafficking........................................................................................ 15
Figures
Figure 1. Coalition and Party Affiliation in Chile’s Senate and Chamber of Deputies ................. 10
Figure A-1. Map of Chile .......................................................................................................... 16
Tables
Table B-1. Chilean Political Acronyms ...................................................................................... 17
Appendixes
Appendix A. Map of Chile ........................................................................................................ 16
Appendix B. Chilean Political Acronyms .................................................................................. 17
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Chile: Political and Economic Conditions and U.S. Relations
Contacts
Author Contact Information ...................................................................................................... 17
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Chile: Political and Economic Conditions and U.S. Relations
February 27, 2010, Earthquake
Current Conditions
At 3:34 AM local time on February 27, 2010, an earthquake of magnitude 8.8 struck off the coast
of central Chile. Centered 70 miles northeast of Chile’s second-largest city, Concepción, at a
depth of 22 miles, the earthquake was the second-largest ever recorded in Chile and the fifth-
largest recorded worldwide since 1900.1 Over 100 aftershocks of magnitude 5.0 or greater were
recorded following the initial earthquake.2
The earthquake and subsequent tsunami, which struck Chile’s coast roughly 20 minutes after the
earthquake and moved 2,000 feet onto shore in some places, have devastated portions of the
country.3 Preliminary reports indicate that 2 million people have been affected, with some 1.5
million homes badly damaged or destroyed and 795 people confirmed dead. The Chilean
government has declared six regions catastrophe zones: Valparaiso, Metropolitana, Libertador
O’Higgens, Araucania, Biobío, and Maule (see Figure A-1 for a map of Chile). The Maule region
was by far the hardest hit, however, accounting for over 500 of the dead. Moreover, the
humanitarian situation is most desperate in Maule, where the majority of the population has lost
access to potable water and electricity and hospitals are severely damaged.4
Infrastructure across the country has been affected with roads destroyed, bridges and power lines
down, and some ports forced to close. Some very early estimates suggest the economic damage
could be between $15 and $30 billion dollars, the equivalent of 10%-20% of Chile’s gross
domestic product (GDP). The infrastructure damage could also slow Chile’s economy in the near
term, jeopardizing the country’s nascent recovery from the global financial crisis. Many believe
the economic and human toll would have been much worse if not for Chile’s stringent building
codes and past experience with earthquakes.5
Chilean Government Response
Since the earthquake, the Chilean government has rushed to provide relief to the victims. In
addition to dispatching search and rescue teams and undertaking preliminary needs assessments,
the government has worked to reestablish basic services and has distributed food, blankets, and
medical equipment to the affected regions. The Chilean National Emergency Office (ONEMI) is
coordinating the relief effort. After conducting its initial assessments, the Chilean government has
1 In 1960, southern Chile was struck by a magnitude 9.5 earthquake. Jose Luis Saavedra, “Massive earthquake hits
Chile, 214 dead,” Reuters, February 27, 2010.
2 For more information on earthquakes see, CRS Report RL33861, Earthquakes: Risk, Detection, Warning, and
Research, by Peter Folger. U.S. Agency for International Development, “Chile – Earthquake,” March 1, 2010.
3 “Chile earthquake death toll tops 700,” Latin News Daily, March 1, 2010. “Maps of the Chile Earthquake,” New York
Times, March 1, 2010.
4 United Nations Office for the Coordination of Humanitarian Affairs, “Chile Earthquake: Situation Report #2,” March
1, 2010; Gobierno de Chile, “Situación terremoto zona centro sur (Actualiza reporte),” March 1, 2010; “Chile quake
toll rises to 795: Bachelet,” Agence France Presse, March 2, 2010.
5 “Chile: Earthquake could boost medium-term growth,” Oxford Analytica, March 1, 2010.
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appealed to the international community for aid. Among other items, the Chilean government has
requested field hospitals, electric generators, satellite communications equipment, water
purification systems, and mobile bridges. Chilean officials have met with U.N. agencies to
establish a clear plan for international assistance, and the United States and other nations have
begun to provide Chile with the aid it has requested.6 Many aid agencies remain on standby,
pending further instructions from the government.
President Michelle Bachelet, who has called the aftermath of the earthquake “an emergency
without parallel,” issued a State of Catastrophe declaration for the regions of Maule and Biobío
on February 28, 2010. The declaration, which was issued following increasing reports of riots and
looting, restricts civil rights and liberties and places the regions under military control in order to
maintain order and avoid social conflict. This is the first time that a State of Catastrophe measure
has been employed since the return to democracy in 1990. President Bachelet has deployed some
14,000 military troops to the two regions to restore order. The military commanders of the
regions, in consultation with the Minister of the Interior and the Minister of Defense, declared a
curfew for the city of Concepción. The curfew was extended to three cities in the Maule region—
Talca, Cauquenes, and Constitución—on March 1. Confrontations between security forces and
the public reportedly have led to at least 160 arrests and one death.7
The Chilean government’s response to the earthquake is complicated by the fact that President
Bachelet will be leaving office on March 11, 2010. Incoming President Sebastián Piñera is a
member of the opposition coalition, and was expected to replace all of Bachelet’s cabinet
ministers and political appointees, including many of those now overseeing relief operations.
Recognizing the need for continuity, Piñera reportedly has indicated that he will retain the head of
ONEMI and has asked the governors of the six regions declared catastrophe zones to stay on
temporarily.8 Additionally, President Bachelet has held meetings with President-elect Piñera in
order to ease the transition.
Political and Economic Background
Independence through Allende
Chile declared independence from Spain in 1810, but did not achieve full independence until
1818. By 1932, Chile had established a mass electoral democracy, which endured until 1973.
During much of this period, Chile was governed by presidents who pursued import-substitution
industrialization (ISI), the expansion of the welfare state, and other statist economic policies.
These policies were expanded following the election of Eduardo Frei Montalva of the Christian
Democratic Party (PDC) in 1964. Frei’s government took majority ownership of the copper
6 United Nations Office for the Coordination of Humanitarian Affairs, “Chile Earthquake: Situation Report #2,” March
1, 2010; Gobierno de Chile, “Situación terremoto zona centro sur (Actualiza reporte),” March 1, 2010; Hillary Rodham
Clinton, “Remarks With Chilean President Michelle Bachelet,” U.S. Department of State, March 2, 2010.
7 “Bachelet decreta primer Estado de Catástrofe desde terremoto de 1985,” El Mercurio (Chile), March 1, 2010;
“Amplían toque de queda en zonas más afectadas por terremoto en Chile,” Agence France Presse, March 1, 2010; “160
detained, one killed during curfew in quake-struck Chile,” Agence France Presse, March 1, 2010; “Troops in Chile
quake areas to number 14,000: Bachelet,” Agence France Presse, March 2, 2010.
8 In Chile, regional governors are appointed by the president. “Chile: Earthquake could boost medium-term growth,”
Oxford Analytica, March 1, 2010.
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mines, redistributed land, and improved access to education. Despite these actions, some Chileans
felt more radical policies were needed.
In 1970, Salvador Allende, a Socialist and the leader of the Popular Unity coalition, was elected
president. Allende accelerated and furthered the changes of the previous administration by fully
nationalizing firms, expanding land reform, and generally socializing the economy. While
Allende’s supporters pushed him to move more quickly, the political center, represented by the
PDC, joined with the parties of the right to block Popular Unity initiatives in the legislature. This
ideological difference prevented the Chilean government from addressing the faltering economy
and served to further radicalize supporters on both ends of Chile’s already polarized society.
When the situation continued to deteriorate following the indecisive 1973 legislative elections,
the military intervened.9
Pinochet Era
On September 11, 1973, the Chilean military, under the control of General Augusto Pinochet,
deposed the Allende government in a violent coup and quickly consolidated control of the
country. The military junta closed Congress, censored the media, declared political parties in
recess, and regarded the organized left as an internal enemy of the state. Within the first few
months of military rule, over 1,200 people in Chile were killed or “disappeared” for political
reasons, and some 18,000 were imprisoned and tortured. By the end of the dictatorship in 1990,
the number of killed or disappeared had risen to at least 2,279 and the number of imprisoned and
tortured reportedly exceeded 27,000.10 General Pinochet emerged as the figurehead of the junta
soon after the coup and won a tightly controlled referendum to institutionalize his regime in 1978.
Pinochet reversed decades of statist economic policies by rapidly implementing a series of
changes that liberalized trade and investment, privatized firms, and dismantled the welfare state.
Pinochet won another tightly controlled referendum in 1980, which approved the constitution that
continues to govern Chile today. The new constitution called for a plebiscite to take place in 1988
in which Chileans would have the opportunity to reelect Pinochet to another eight-year term or
reject him in favor of contested elections. Although the Chilean economy enjoyed a period of
rapid economic growth between 1976 and 1981, a banking crisis from 1981 to 1984 sparked
widespread protests.11 Following these initial demonstrations, Chilean civil society groups
became more active in criticizing the policies of the Pinochet regime. At the same time, political
parties began to reemerge to challenge the government. In 1988, several civil society groups and
political parties formed a coalition in opposition to Pinochet’s reelection. In the plebiscite, 55% of
the Chilean people voted against another eight-year term for Pinochet, triggering the election
campaign of 1989.12
9 Chile: A Country Study, ed. Rex A. Hudson, (Washington, D.C.: Library of Congress, 1994).
10 Report of the National Commission for Truth and Reconciliation, February 1991; Report of the National
Commission on Political Imprisonment and Torture, November 2004.
11 For more information on the Chilean financial crisis and its comparisons to the U.S. financial crisis, see CRS Report
RS22961, The U.S. Financial Crisis: Lessons From Chile, by J. F. Hornbeck.
12 Alan Angell & Benny Pollack, “The Chilean Elections of 1989 and the Politics of the Transition to Democracy,”
Bulletin of Latin American Research, Volume 9 (1), 1990.
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Return to Democracy
The 1989 elections created the political dynamics that prevail in Chile today. Two major
coalitions of parties were formed to contest the elections. The center-left “Coalition of Parties for
Democracy,” or Concertación, united 17 groups that were opposed to the Pinochet dictatorship.
The major parties in the coalition included the centrist PDC and the center-left Radical Party
(PR), Social Democratic Party (PSD) and Party for Democracy (PPD)—which was created by
Socialists in 1987 to circumvent the Pinochet regime’s ban on Marxist parties. The center-right
“Democracy and Progress” coalition included the center-right National Renovation (RN) and the
rightist Independent Democratic Union (UDI). A third coalition, the “Broad Party of the Socialist
Left,” was composed of leftist parties unwilling to participate in the Concertación, including the
Communist Party (PC). Patricio Alwyn, a Christian Democrat and the candidate of the
Concertación, won the presidency with 55% of the vote and the Concertación won majorities in
the Chamber of Deputies and among the elected members of the Senate.13
The major political coalitions have changed little since 1989. The Concertación is now composed
of the PDC, the PPD, the Socialist Party (PS), which officially began contesting elections as a
part of the Concertación in 1993, and the Radical Social Democratic Party (PRSD), which was
created through a 1994 merger of the PR and PSD. Although the center-right coalition continues
to be composed of RN and UDI, it has undergone a number of name changes, most recently
becoming the “Alliance for Chile,” or Alianza. The leftist coalition that includes the PC is now
called "Together We Can Do More" (JPM).
The Concertación has governed Chile continuously since the transition to democracy. In addition
to Alwyn’s election, Eduardo Frei Ruiz-Tagle of the PDC was elected president in 1993, followed
by Ricardo Lagos of the PPD in 1999, and Michelle Bachelet of the PS in 2006. Concertación
governments have pushed through a number of constitutional reforms that strengthened civilian
control over the military, eliminated the institution of unelected senators, and reduced presidential
terms from six years to four. They have been unable to eliminate the binomial election system,
however, which has historically inflated conservative representation as a result of two-member
districts that require a coalition to win by two-to-one margins in order to secure both seats.14
All of the Concertación administrations have generally maintained the open economic policies of
the Pinochet regime. They have promoted export-led development through their pursuit of free
trade agreements and encouragement of new export sectors such as forestry products, salmon,
fresh fruit, wine, and methanol. Chile has over 50 bilateral or regional trade agreements, more
than any other country, and has established a diverse economy much less reliant on its traditional
copper exports.15 Chile’s economy has grown by an average of 5.1% per year during the two
decades of Concertación rule, and the World Bank now classifies Chile as an upper middle
income developing country based on its 2008 per capita income of $9,400.16 On January 11,
13 Ibid. Prior to a 2005 constitutional reform, former presidents served as “senators-for-life” and nine senators were
designated by the armed forces and other bodies.
14 Peter M. Siavelis, “Electoral System, Coalitional Disintegration, and the Future of Chile’s Concertación,” Latin
American Research Review, Volume 40 (1), 2005.
15 Central Intelligence Agency, “World Factbook,” September 2008.
16 World Bank, “World Development Report,” 2010.
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2010, Chile became the first South American nation to join the Organization for Economic
Cooperation and Development (OECD).17
Concertación administrations have also implemented some redistribution policies designed to
spread the benefits of Chile’s economic growth. Although income distribution remains virtually
unchanged since the dictatorship, economic growth and the social programs of the Concertación
have been successful in reducing poverty. The percentage of Chileans living in poverty fell from
38.8% in 1989 to 13.7% in 2009.18 Chile is also the only country in Latin America and the
Caribbean on pace to meet all eight of the United Nations (UN) Millennium Development
Objectives by 2015. The objectives work toward the goals of eradicating extreme hunger and
poverty, achieving universal primary education, promoting gender equality, reducing child
mortality, improving maternal health, combating disease, ensuring environmental stability, and
developing a global partnership for development.19
Recent Political and Economic Developments
Bachelet Administration
Michelle Bachelet, a Socialist member of the Concertación, became the first female president of
Chile following her January 2006 election. Bachelet defeated the Alianza’s Sebastián Piñera
53.5% to 46.5% in a second-round runoff after failing to secure an absolute majority in the
December 2005 first-round election. In concurrent legislative elections, the Concertación won
majorities in both legislative houses, securing 65 of the 120 seats in the Chamber of Deputies and
20 of the 38 seats in the Senate.20 As a result of the 2005 constitutional reform that eliminated the
institution of unelected senators, the Concertación established true majorities in both legislative
houses for the first time.
Despite her historic victory and the initial strong legislative position of the Concertación,
Bachelet has struggled during much of her term. Education protests and militant indigenous
groups have challenged the Bachelet Administration since its inception. Likewise, a series of
corruption scandals, party infighting, and defections from the Concertación allowed the
opposition Alianza to gain control of both houses of Congress in March 2009. While the global
financial crisis has provided President Bachelet with her latest challenge, her administration’s
timely decision to save recent fiscal surpluses has allowed Chile to pursue counter-cyclical
policies and minimize the effects of the economic downturn. Bachelet’s popularity has soared as a
result of her handling of the financial crisis, with her approval rating rising from 46% in late 2008
to a record high of 83% in January 2010.21 Since presidents are ineligible to serve consecutive
terms in Chile, President Bachelet was not a candidate in the most recent presidential election.
She is scheduled to leave office on March 11, 2010, following the inauguration of Sebastián
Piñera (see “2009 Presidential and Legislative Elections”).
17 Daniela Estrada, “Development: Chile Pins Its Hopes On The OECD,” Inter Press Service, January 12, 2010.
18 “El País Que Entrega la Concertación Dos Décadas Después de Asumir el Mando,” El Mercurio, January 18, 2010.
19 “Chile: Leading the Millennium Objectives League,” Latin American Brazil & Southern Cone Report, September
2008.
20 “Chile: Country Report,” Economist Intelligence Unit, January 2006; February 2006.
21 “Chilean President’s Rating Rises Despite Vote,” Reuters, February 1, 2010.
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Education Demonstrations
Since the transition to democracy, many Chileans have called on the government to address
inequality in the education system. Activists contend that Pinochet-era privatization policies—
which allow private schools to access state subsidies while selectively accepting students—have
created a system of elitism and segregation that discriminates against low-income Chileans.22
Despite successive Concertación governments’ lack of action, students had high hopes following
Bachelet’s election since she had based her campaign around themes of social justice. When
President Bachelet neglected to even mention education during a state of the nation speech in
May 2006, Chilean students organized the largest social demonstrations in the country since the
return to democracy.
With nearly 75% of the public backing them at the height of the protests, students filled the
streets, took over schools, and organized rallies that drew as many as 800,000 people.23 The
resulting street violence and near complete shutdown of Chile’s education system forced
President Bachelet to shuffle her cabinet, replacing the education, economy, and interior
ministers. President Bachelet also increased education spending and created a commission to
consider education reform. In August 2009, the Bachelet Administration put forward a new law
regulating the education system known as the General Education Law (LGE). Among other
provisions, the LGE would end selection for students up to the ninth grade. Student groups and
teachers unions have protested the new law, maintaining that it does not do enough to address
education inequality.24
Mapuche Activism
Confrontation with the Mapuche population has been a persistent challenge for the Bachelet
Administration. The Mapuche are Chile’s largest indigenous group and comprise approximately
4% of Chile’s 16.6 million citizens.25 They are mainly located in the central and southern regions
of Bíobío, Araucanía, Los Ríos, and Los Lagos (see Appendix A for a map of Chile). The
Mapuche—who experience significantly higher poverty levels, lower education levels, and poorer
living standards than the general Chilean population—have long sought official recognition as a
people, protection of indigenous rights, and restoration of full ownership of their ancestral lands.
Mapuche groups have pursued these ends through a variety of means. Some pushed for the
ratification of convention 169 of the International Labour Organization (ILO) on indigenous
rights, which President Bachelet promulgated in September 2008.26 Others, such as the Arauco-
Malleco Coordinating Committee (CAM), have employed more militant actions, occupying
ancestral Mapuche lands and burning vehicles, machinery, and buildings on them—frequently
targeting logging companies.27
22 Andrea Arango, “The Failings of Chile’s Education System: Institutionalized Inequality and a Preference for the
Affluent,” Council on Hemispheric Affairs, July 30, 2008; “Chile: Pinochet-era education law finally replaced,” Latin
News Weekly Report, August 20, 2009.
23 Monte Reel, “Chile’s Student Activists: A Course in Democracy,” Washington Post, November 25, 2006.
24 “Chile: Pinochet-era Education Law Finally Replaced,” Latin News Weekly Report, August 20, 2009.
25 Central Intelligence Agency, “World Factbook,” November 2009.
26 “Bachelet Makes Gesture to Chile’s Indigenous Groups,” Latin News Weekly Report, September 25, 2008.
27 “Chile: Bachelet Reacts to Challenge by Radical Activists,” Latin News Security & Strategic Review, January 2008.
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Successive Concertación governments have pledged to rectify Chile’s relationship with its
indigenous population, transferring some 650,000 hectares28 of land to Mapuche communities
since 1994.29 Nonetheless, Mapuche communities maintain that land transfers have been slow and
represent only a fraction of their ancestral territory.30 As a result of its dissatisfaction with the
Bachelet Administration’s efforts on indigenous issues, CAM has steadily increased its militant
actions in recent years, going so far as to declare war on Chile in October 2009.31 The Chilean
government has responded by capturing and imprisoning many of CAM’s leaders, including
Llaitul Carillanca, CAM’s alleged military commander.32
The Bachelet Administration has been criticized by a number of observers across the political
spectrum for its actions. Conservative politicians and media sources have accused the government
of insufficient action, and have alleged connections between CAM and foreign terrorist
organizations like the Revolutionary Armed Forces of Colombia (FARC) and Basque Homeland
and Freedom (ETA). The Bachelet Administration insists that there is no credible evidence of
operational links between these groups, and CAM denies having any foreign ties.33 Mapuche
groups and human rights organizations have also criticized the Bachelet Administration, accusing
Chile’s carabineros (police force) of arbitrary arrests, torture, and beatings of Mapuche people.
They also condemn the government’s decision to prosecute Mapuche activists under a Pinochet-
era anti-terrorism law that allows prosecutors to withhold evidence from the defense, permits the
testimony of anonymous witnesses, and mandates punishments that are three times the normal
criminal sentences for activities such as arson and illegal land occupation.34 The Bachelet
Administration maintains that while the government does not consider Mapuche organizations to
be terrorist groups, the terrorism law is appropriate for certain actions.35
Loss of Legislative Control
President Bachelet’s ability to govern has been hampered by Concertación struggles in the
legislature since the 2005 election. A number of corruption scandals involving missing public
funds and falsified election campaign financial reports hit the coalition in late 2006. These
scandals led to the Concertación losing two deputies to corruption charges, one from the PPD and
one from the PS. Soon after, the PPD expelled one of the party’s founders, Deputy Jorge
Schaulsohn, for accusing the Concertación of having a culture of corruption. This expulsion led to
two other high-profile members of the party—Deputy Javier Etcheberry and Senator Fernando
Flores—leaving the party and the Concertación. Senator Flores and Deputy Schaulsohn have
since created a new party, Chile Primero.36
28 A hectare is equal to about 2.5 acres or 0.004 square miles.
29 Daniela Estrada, “Chile: Mapuche Detainees Say They Were Framed,” Inter Press Service, November 20, 2009.
30 Raúl Zibechi, “Toward Reconstruction of the Mapuche Nation,” Center for International Policy, November 13,
2009.
31 “Conflicto Mapuche Preocupa Pero No Hay Una ‘Guerra Civil’, Según Gobierno,” EFE News Service, October 21,
2009.
32 “Chile Arrests Mapuche Militant,” Latin News Daily, July 17, 2009.
33 “Chile: Bachelet Reacts to Challenge by Radical Activists,” Latin News Security & Strategic Review, January 2008.
34 Benjamin Witte-Lebhar, “Chile: No End in Sight for Worsening Mapuche Conflict,” Latin America Data Base
NotiSur, November 13, 2009; “Mapuches Declare ‘War’ on Chile,” Latin News Daily, October 22, 2009.
35 Daniela Estrada, “Chile: Mapuche Detainees Say They Were Framed,” Inter Press Service, November 20, 2009.
36 “Chile: Concertación Faces Schism,” Latin News Weekly Report, May 10, 2007.
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In November 2007, President Bachelet requested a new public subsidy for the failing
Transantiago transportation system. Senator Adolfo Zaldívar of the PDC joined with Senator
Flores, and the senators of the Alianza to defeat the proposal. The PDC expelled Senator Zaldívar
from the party for his lack of party discipline on an issue of importance to the ruling coalition,
leading five deputies from Zaldivar’s faction of the PDC to leave the party and the
Concertacíon.37
After all of the corruption charges, expulsions, and resignations, the Concertación was left with
only 56 of the 120 seats in the Chamber of Deputies and 18 of the 38 seats in the Senate.38 The
Alianza reached an agreement with the unaffiliated members of the Senate to make Senator
Zaldívar the Senate President in 2008 in exchange for making a member of the Alianza the Senate
President in 2009. The Chamber of Deputies decided to allow the Concertación to remain in
control of the Presidency in 2008 but hand control to the Alianza in 2009.39 In March 2009,
Jovino Novoa—a member of the UDI and a controversial figure who served as general sub-
secretary in the Pinochet government from 1979 to 1982—was elected president of the Senate,
and Rodrigo Alvarez, also of the UDI, was elected president of the Chamber of Deputies. The
Alianza now controls both houses of Congress for the first time since the transition to democracy.
Global Financial Crisis
President Bachelet’s most recent challenge has been the global financial crisis, which has taken a
considerable toll on Chile’s economy. The Santiago Stock Exchange (IPSA) suffered a 22%
decline in 2008.40 Likewise, the price of copper—which provides 40% of the government’s
revenues—fell below $2 per pound for the first time in three years in October 2008, leading to a
23% drop in government copper revenues.41 Moreover, real gross domestic product (GDP)
growth slowed from 5.1% in 2007 to just 3.2% in 2008.42
The Chilean government has taken a number of steps to counter the effects of the economic
downturn. In January 2009, President Bachelet announced a $4 billion (2.8% of GDP) economic
stimulus package. Among other provisions, the plan included temporary tax cuts for small
businesses, increased benefits for poor Chileans, $700 million for infrastructure projects, and $1
billion for Codelco, the state-owned copper company.43 The Bachelet Administration has financed
its counter-cyclical spending by drawing on two sovereign wealth funds in which the Chilean
government had invested $20.3 billion (12% of GDP) from fiscal surpluses generated by high
copper prices prior to the financial crisis. The independent Chilean Central Bank has also cut the
benchmark interest rate by 7.75 points since early 2009 to a record low of 0.5%.44
37 “Chile: DC Crisis Sets Scene for 2009 Contest,” Latin American Brazil & Southern Cone Report, December 2007.
38 “Defections Leave Chile’s Ruling Coalition in Precarious Situation,” Latin American Brazil & Southern Cone
Report, January 2008.
39 “Chile: Zaldívar Assumes Presidency of Senate,” Latin News Weekly Report, March 19, 2008.
40 James Attwood, “Chile’s Ipsa Stock Index Climbs to Record as Copper Advances,” Bloomberg, December 21, 2009.
41 “Ministro Chileno: Presupuesto Fiscal Sólido Pese a Baja Cobre,” Dow Jones Newswires, October 22, 2008;
“Country Report: Chile,” Economist Intelligence Unit, March 2009.
42 “Chile: Country Report,” Economist Intelligence Unit, May 2009.
43 Ibid; "Chile's Economy: Stimulating," The Economist, February 19, 2009.
44 “Chile: New Benchmark Rate Cut Leaves No Room for More,” Oxford Analytica, July 10, 2009.
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The Bachelet Administration’s actions appear to have been somewhat successful. Chile emerged
from recession in the third quarter of 2009, with quarter-on-quarter GDP growth of 1.1% after
four consecutive quarters of economic contraction.45 By the end of 2009, the IPSA index had
rallied 48% and unemployment had returned to single digits. Although independent economists
believe the Chilean economy suffered a 1% contraction in 2009, they now expect the country to
grow by 4.2% in 2010.46
2009 Presidential and Legislative Elections
Results
On January 17, 2010, businessman Sebastián Piñera of the center-right Alianza coalition was
elected president of Chile in a second-round runoff. Piñera defeated former President Eduardo
Frei (1994-2000) of the center-left Concertación, 51.8 to 48.1.47 He was forced to contest a runoff
after he failed to win an absolute majority of the vote in a first-round election held on December
13, 2009. Piñera was the leading vote-getter in the first-round, winning the support of 44% of the
electorate. He was followed by Frei at 29.6% and two Concertación dissidents, Marco Enríquz-
Ominami and Jorge Arrate, at 20.3% and 6.2%, respectively.48 Although Arrate immediately
called on his supporters to back Frei, Enríquez-Ominami did not endorse Frei until shortly before
the second-round vote. Piñera’s electoral victory is the first for the Chilean right since 1958, and
will bring an end to 20 years of Concertación governance.
Despite the Alianza victory, most analysts do not view the vote as a rejection of the moderate
social democratic policies of the Concertación. They note that Bachelet enjoyed an 83% approval
rating at the time of the election.49 They also note that Piñera projected a moderate image
throughout the campaign. In addition to emphasizing his 1988 vote against the continuation of the
Pinochet regime and running under the banner of the “Coalition for Change”—which was
supported by some Concertación dissidents in addition to the parties of the Alianza (RN and
UDI)—Piñera pledged to generally continue the policies of the Concertación and even extend
Chile’s social protection network to the middle class.50 These analysts contend that the election
result instead reflected a desire for new leadership after two decades of governance by a coalition
that had undergone little internal renovation.51
Legislative elections for half of the seats in the Senate and the entire Chamber of Deputies were
held concurrently with the first round of the presidential election. As a result of the elections, the
Alianza will hold 16 of the 38 seats in the Senate and 58 of the 120 seats in the Chamber of
Deputies. The Concertación and the leftist JPM coalition signed an electoral pact prior to the
45 “Chile Economy: Quick View—Out of Recession,” Economist Intelligence Unit, November 20, 2009.
46 James Attwood, “Chile’s Ipsa Stock Index Climbs to Record as Copper Advances,” Bloomberg, December 21, 2009;
“Chile: Country Report,” Economist Intelligence Unit, January 2010.
47 “Chile: Piñera Wins the Second Round,” Latin American Brazil & Southern Cone Report, February 2010.
48 “Frei Earns Right to Face Rampant Piñera in January Run-off in Chile,” Latin American Weekly Report, December
17, 2009.
49 “Chilean President’s Rating Rises Despite Vote,” Reuters, February 1, 2010.
50 “The Strange Chill in Chile,” The Economist, September 17, 2009; “Chile: Piñera’s Plan,” Latin News Weekly
Report, December 3, 2009.
51 “Tendencias Que Muestra La Reciente Elección,” El Mercurio (Chile), January 19, 2010;
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elections; together, they will hold 19 seats in the Senate and 57 seats in the Chamber of
Deputies.52 The Communists will be represented in Congress for the first time since the 1973
overthrow of Salvador Allende, as three of the Concertación-JPM seats in the Chamber of
Deputies will be held by the PC. The remaining three Senate seats and five Chamber of Deputies
seats will be held by independents and members of the Regionalist Party of Independents (PRI),
who are unaffiliated with either of the major coalitions.
Figure 1. Coalition and Party Affiliation in Chile’s Senate and Chamber of Deputies
Seat Distribution Following the 2009 Elections
Source: Created by CRS, based on information from “Chile: Country Report,” Economist Intelligence Unit,
January 2010.
Notes: There are 38 seats in the Senate and 120 seats in the Chamber of Deputies. See Table B-1 for political
party acronyms.
Prospects for the Piñera Administration
In addition to maintaining the popular social welfare policies of the Bachelet Administration,
Piñera has pledged to boost Chile’s annual economic growth to 6% and create 1 million new jobs
during his four-year term. He intends to do so by attracting increased investment and running
government more efficiently. 53 Policy-wise, Piñera has suggested offering tax incentives to
reinvest profits and creating a National Office of Innovation and Entrepreneurship. He has also
52 “Chile: Country Report,” Economist Intelligence Unit, January 2010.
53 Sebastian Boyd & James Attwood, “Chile’s Pinera ‘Buries’ Pinochet in Presidential Win,” Bloomberg, January 18,
2010.
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suggested privatizing a portion of Codelco—the state-owned copper company—and amending
the labor law to reduce the cost of firing workers.54
Some analysts believe that Chile’s tradition of political cooperation should enable Piñera to
implement his policy agenda; however, he could face several challenges.55 Piñera’s coalition lacks
a majority in both houses of Congress and will need to win the support of unaffiliated or
Concertación Members of Congress in order to pass legislation (see Figure 1). Although some
members of the Concertación—especially within the centrist PDC—have indicated their
willingness to work with Piñera,56 the leadership of the coalition has pledged to present a “critical
opposition” and “defend the work of the Concertación and the labor and social victories that have
been achieved.”57 Piñera may also struggle to keep his own coalition together. Although he hails
from the more moderate sector of the Alianza—the RN—and pledged considerable continuity
with Concertación policies, the conservative UDI wields considerable legislative power and may
push for radical changes. The Chilean right has already criticized Piñera for naming a cabinet that
includes 14 independents and just four members of the UDI.58 Moreover, some observers believe
that Piñera’s independent-dominated cabinet, which is composed primarily of individuals with
private-sector backgrounds, may lack the political experience necessary to implement the new
administration’s agenda.59
Human Rights
In the immediate aftermath of the transition to civilian democratic rule, little was done to address
Pinochet-era human rights violations. Recognizing the still delicate status of democracy, the first
Concertación administration allowed a 1978 amnesty law to remain in place, but established a
National Commission for Truth and Reconciliation (Rettig Commission) to investigate political
disappearances and killings during the authoritarian period. The Rettig Commission’s
recommendations led to the Chilean government awarding reparations to family members of
those killed or disappeared.
Significant discussions and prosecutions of human rights abuses did not occur until 1998, when
Pinochet stepped down as the head of the Armed Forces and was subsequently detained in the
United Kingdom on an extradition request from Spain.60 In 2003, the Lagos Administration
established a National Commission on Political Imprisonment and Torture (Valech Commission),
which awarded reparations to those who were tortured under the Pinochet regime. Although the
Chilean judiciary stripped Pinochet of immunity so that he could stand trial for human rights
violations committed under his government, some charges were dropped as a result of his failing
health, and he died of complications from a heart attack in 2006 while still under indictment.61
54 Matt Moffett, “Chile’s New Leader Faces Economic Hurdles,” Wall Street Journal, January 18, 2010.
55 “Chile Elections: Conservative Takes Helm,” Economist Intelligence Unit, January 18, 2010.
56 Alejandro Trujillo & Patricio Yévenes, “DC Inicia Tratativas para que Concertación Pacte Con Alianza la
Presidencia del Senado,” El Mercurio (Chile), January 26, 2010.
57 M. Herrera, J. González & Constanza Caldera, “Concertación Anuncia ‘Oposición Crítica’ a Piñera y Defensa de
Legado de la Coalición,” El Mercurio (Chile), January 24, 2010.
58 “Chile Right Fidgets About Piñera’s Cabinet,” Latin News Daily, February 16, 2010.
59 “Chile: Homogenous Cabinet Lacks Political Experience,” Oxford Analytica, February 15, 2010.
60 Priscilla B. Hayner, Unspeakable Truths: Facing the Challenge of Truth Commissions (New York: Routledge, 2002).
61 Jack Epstein, “Augusto Pinochet: 1915-2006/Chilean Leader’s Regime Left Thousands of ‘Disappeared’,” San
(continued...)
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Prosecutions for dictatorship-era human rights violations have accelerated in recent years. Former
intelligence chief, retired General Manuel Contreras, was sentenced to two life prison terms in
July 2008 for organizing the 1974 double assassination of General Carlos Prats and his wife in
Buenos Aires, Argentina. Contreras was already imprisoned as a result of convictions stemming
from other dictatorship-era crimes, including the 1976 assassination of former Ambassador to the
United States Orlando Letelier and his American associate, Ronni Moffitt, in Washington, DC.62
Sergio Arellano Stark, the commander of the so-called “Caravan of Death” that executed 80
political prisoners of the dictatorship shortly after the coup in 1973, was sentenced to 6 years in
prison in October 2008.63 In the country’s largest roundup of alleged human rights violators,
arrest warrants for 129 former military personnel were issued in September 2009.64 In December
2009, six Chileans were arrested for the alleged 1982 assassination of former President Eduardo
Frei Montalva (1964-1970). Frei’s death was initially blamed on complications from routine
stomach surgery, but Chilean authorities now believe he was poisoned for his prominent
opposition to the Pinochet regime.65 In February 2010, the Bachelet Administration announced
that it would reopen the Rettig and Valech Commissions for six months in order to investigate
cases of human rights abuses that were not considered during the commissions’ initial mandates.66
While family members of the disappeared and other human rights advocates have celebrated the
increasing number of prosecutions, they continue to push for greater transparency concerning the
actions of the dictatorship and for those responsible to be brought to justice.67
Energy Challenges
As a result of limited domestic energy resources and increasing demand due to its strong
economic growth, Chile has become heavily dependent upon foreign energy imports. Over the
past decade, Chilean demand for electricity grew at an average rate of 6% per year.68 In order to
satisfy this demand, primary energy imports increased from 45% to 67% of the total supply
between 1990 and 2006. Chile now imports about 99% of its crude oil, 72% of its natural gas, and
92% of its coal.69 While Chile has tried to secure sufficient energy resources through its open
economic policies, its supply has been threatened by regional developments. In 2004, Argentina
cut its natural gas exports to Chile as a result of a domestic energy crisis. Since then, Argentine
(...continued)
Francisco Chronicle, December 11, 2006.
62 Helen Hughes & Jack Chang, “Ex-Chilean Intelligence Chief Gets 2 Life Sentences,” Miami Herald, July 1, 2008.
63 “Condenan a General Chileno por Crímenes de ‘Caravana de la Muerte’,” Agencia Mexicana de Noticias, October
15, 2008.
64 “Chile Arrests 25 Ex-Military On Rights Abuse Charges,” Agence France Presse, September 2, 2009.
65 Juan Forero, “In Chile, Case Resurrects Ghosts of Bloody Pinochet Dictatorship,” Washington Post, December 9,
2009.
66 “Chile Restarts Human Rights Investigations,” Latin News Daily, February 9, 2010.
67 “Familiares de Víctimas de Pinochet Mantienen Viva Demanda de Justicia,” Agencia Mexicana de Noticias,
September 5, 2008.
68 “Chile: Medium-Term Electricity Supply Looks Secure,” Oxford Analytica, April 23, 2009.
69 Oscar Landerretche, “Chile’s Choices: Maintaining Growth and Securing Supply,” in Energy and Development in
South America: Conflict and Cooperation, eds. Cynthia J. Arnson et al., 27-34, (Washington, D.C.: Woodrow Wilson
International Center for Scholars, 2008).
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natural gas exports to Chile have fluctuated considerably, nearly leading to electricity rationing in
early 2008.70
Argentine export cutbacks have adversely impacted Chilean economic activity and have forced
Chile to reconsider its energy options. Chile is now focusing on diversifying both its energy
suppliers and supplies. The Chilean government and private firms began developing liquefied
natural gas (LNG) terminals in 2006. The first LNG terminal began operating in 2009 and another
is expected to come online in 2010.71 Given the feasibility of establishing power plants close to
ports and the diversity of countries that export coal, Chile has begun to increase its reliance on
coal-fired power plants. These plants are expected to produce a quarter of all Chilean electricity
by 2020, up from 15% at present. Domestic renewable sources of energy are also receiving
increased attention. Chile has begun construction on a number of new hydroelectric plants, is
studying geothermal and tidal energy potential, and is installing wind farms. A 2008 law requires
energy providers to generate 5% of their electricity from renewable sources by 2010 and 10% by
2024.72
Chile-U.S. Relations
The United States and Chile have enjoyed close relations since Chile’s transition back to
democracy. The countries maintain strong commercial ties and share common commitments to
democracy, human rights, and free trade. Both countries have demonstrated these commitments
by supporting the Inter-American Democratic Charter, signing a bilateral free trade agreement,
and supporting the proposed Free Trade Area of the Americas (FTAA).73 Relations have grown
even closer during the Obama Administration. Vice President Biden visited Chile in March 2009
during his first trip to Latin America, and President Bachelet met with President Obama in
Washington, DC, in June 2009. Bachelet and Obama reportedly discussed cooperation on climate
change, renewable energy, and economic development, and signed an agreement to increase U.S.
support of renewable energy programs in Chile. Bachelet has described her Administration’s
close relations with the Obama Administration as “one of the most important events in U.S.-Chile
relations in recent times.”74
U.S. Assistance
In order to promote economic development and prevent the election of a communist government,
the United States provided Chile with extensive assistance during the 1950s and 1960s. President
Kennedy made Chile the centerpiece of his “Alliance for Progress,” providing the country with
$293 million in economic assistance between 1961 and 1963.75 Assistance declined following the
election of Allende and has generally remained low since then, increasing briefly during the early
70 “Chile: Medium-Term Electricity Supply Looks Secure,” Oxford Analytica, April 23, 2009.
71 Nicole Spencer & Siobahn Sheils, “Chile Update: Energy Policy,” Americas Society/Council of the Americas,
September 9, 2009.
72 “Chile: Medium-Term Electricity Supply Looks Secure,” Oxford Analytica, April 23, 2009.
73 For more information on the FTAA, see: CRS Report RS20864, A Free Trade Area of the Americas: Major Policy
Issues and Status of Negotiations, by J. F. Hornbeck.
74 “Washington Watch,” Latin News Daily, June 25, 2009.
75 This is the equivalent of $1.6 billion in constant 2006 dollars; U.S. Overseas Loans and Grants (Greenbook) 2006.
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years of the Pinochet dictatorship and again following the transition to democracy. Chile received
$1.4 million in U.S. assistance in FY2008, an estimated $1.2 million in FY2009, and will receive
$2.3 million in FY2010 under the Obama Administration’s request.76 The majority of U.S.
assistance to Chile is focused on modernizing the Chilean military by improving its capacity to
act as a peacekeeping force and its ability to conduct joint operations with the U.S. military. U.S.
assistance also goes to programs that deter weapons of mass destruction, improve civilian control
over the military, and upgrade military equipment.
Free Trade Agreement
The United States and Chile signed a bilateral free trade agreement (FTA) on June 6, 2003.
Following the House and Senate passage of the U.S.-Chile Free Trade Implementation Act,
President Bush signed the bill into law on September 3, 2003 (P.L. 108-77). The FTA established
immediate duty-free treatment for 85% of bilateral trade in consumer and industrial products,
increasing market access for both countries.77 Since the agreement went into force on January 1,
2004, bilateral trade between the United States and Chile has more than doubled, totaling $15.3
billion in 2009. U.S. imports from Chile grew from $3.7 billion in 2003 to $5.9 billion in 2009,
while U.S. exports to Chile grew from $2.7 billion in 2003 to $9.4 billion in 2009. Chile’s top
exports to the United States were fruit, copper, seafood, wood, and precious stones. The United
States top exports to Chile were heavy machinery, oil, aircraft, electrical machinery, and motor
vehicles. In 2008, the United States was Chile’s top source of imports and the second-largest
destination for Chile’s exports, and in 2009, Chile was the 24th-largest export market for U.S.
goods.78
Regional Leadership
Chile has been an active participant in multilateral engagement in the hemisphere, often serving
as a moderating influence in the region. Since 2004, Chile has worked with the United States as
part of the multinational peacekeeping force in Haiti, first as a part of the Multinational Interim
Force-Haiti (MIFH) and subsequently as a part of the U.N. Stabilization Mission in Haiti
(MINUSTAH). Chile has committed more human and material resources to MINUSTAH than it
has to any previous peacekeeping mission, and the country’s early presence in the MIFH
encouraged a number of other countries in the region to play a role in MINUSTAH.79 Chile has
also worked with the United States or other regional partners in recent years to resolve domestic
political crises in Venezuela, Bolivia, and Honduras.80
76 U.S. Department of State “FY2010 Congressional Budget Justification for Foreign Operations,” May 29, 2009.
77 For more information on the U.S.-Chile Free Trade Agreement, see: CRS Report RL31144, The U.S.-Chile Free
Trade Agreement: Economic and Trade Policy Issues, by J. F. Hornbeck.
78 U.S. Department of Commerce and Servicio Nacional de Aduana (Chile) statistics, as presented by Global Trade
Atlas, February 2010.
79 Enzo Di Nocera García & Ricardo Benavente Cresta, “Chile: Responding to a Regional Crisis,” in Capacity Building
for Peacekeeping: The Case of Haiti, eds. John T. Fishel & Andrés Sáenz, 66-90 (Dulles, VA: Potomac Books, 2007).
80 Juan Forero, “Friends of Venezuela Are There to Help,” New York Times, January 31, 2003; Patrick J. McDonnell,
“Regional Summit Calls on Bolivians to Avoid Strife,” Los Angeles Times, September 16, 2008; “Bachelet No Acepta
Legitimar Los Golpes De Estado,” La Nación (Chile), December 1, 2009.
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Narcotics and Human Trafficking
Although Chile is not a drug-producing country, it is increasingly used as a transshipment point
for Andean cocaine destined for Europe and, to a lesser extent, the United States. It is also a
source for precursor chemicals used in the processing of cocaine. The United States provides
support to the Chilean government for anti-narcotics programs focused on police intelligence
capabilities, interagency cooperation, anti-money laundering efforts, and maritime security.
Through September 2008, Chilean officials had seized 1,421 kilograms of cocaine; 3,200
kilograms of cocaine paste; and 7,087 kilograms of marijuana. Chile provided regional leadership
in counternarcotics as the President of the Inter-American Drug Abuse Control (CICAD) for
2009.81
Chile is also a source, transit, and destination country for trafficking in persons for commercial
sexual and labor exploitation. While Chile has made efforts to fully comply with the minimum
standards for the elimination of trafficking—maintaining law enforcement, protection, and
prevention programs—authorities have reported difficulties in prosecuting some crimes as a
result of gaps in the country’s anti-trafficking statutory framework. As a result, the U.S.
Department of State designates Chile a “Tier 2” country, and recommends that it enact stricter
anti-trafficking legislation and continue strengthening victim protection efforts.82
81 U.S. Department of State, Bureau for International Narcotics and Law Enforcement Affairs, “2009 International
Narcotics Control Strategy Report (INCSR),” February 27, 2009.
82 U.S. Department of State, Office to Monitor and Combat Trafficking in Persons, “Trafficking in Persons Report,”
June 2009.
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Appendix A. Map of Chile
Figure A-1. Map of Chile
Source: Map Resources. Adapted by CRS Graphics.
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Appendix B. Chilean Political Acronyms
Table B-1. Chilean Political Acronyms
Acronym Political
Organization
Description
CAM Arauco-Mal eco
Coordinating
Militant Mapuchea organization
Committee
JPM
Together We Can Do More
Leftist coalition of parties
PC
Communist Party
Leftist member party of JPM
PDC
Christian Democratic Party
Centrist member party of the
Concertaciónb
PPD
Party for Democracy
Center-left member party of the
Concertación
PR
Radical Party
Center-left member party of the
Concertación at return to democracy
PRI
Regionalist Party of Independents
Centrist party formed in a merger of
regional parties, now controlled by
PDC dissidents.
PRSD
Radical Social Democratic Party
Center-left member party of the
Concertación, merger of PR and PSD
PS
Socialist Party
Center-left member party of the
Concertación
PSD
Social Democratic Party
Center-left member party of the
Concertación at return to democracy
RN
National Renovation
Center-right member party of the
Alianzac
UDI
Independent Democratic Union
Rightist member party of the Alianza
Source: Compiled by CRS.
Notes:
a. The Mapuche are Chile’s largest indigenous group.
b. The Concertación is a center-left coalition of parties.
c. The Alianza is a center-right coalition of parties.
Author Contact Information
Peter J. Meyer
Analyst in Latin American Affairs
pmeyer@crs.loc.gov, 7-5474
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