Geography
Area: 756,945 sq. km. (302,778 sq. mi.); nearly twice the size of California.
Cities: Capital--Santiago (metropolitan area est. 6 million). Other cities--Concepcion-Talcahuano (840,000), Vina del Mar-Valparaiso (800,000), Antofagasta (245,000), Temuco (230,000).
Terrain: Desert in north; fertile central valley; volcanoes and lakes toward the south, giving way to rugged and complex coastline; Andes Mountains on the eastern border.
Climate: Arid in north, Mediterranean in the central portion, cool and damp in south.

People
Nationality: Noun and adjective--Chilean(s).
Population (2003): 15.1 million.
Annual population growth rate: 1.2%.
Ethnic groups: Spanish-Native-American (mestizo), European, Native-American.
Religions: Roman Catholic 69.9%; Protestant 15%.
Language: Spanish.
Education: Years compulsory--12. Attendance--3 million. Adult literacy rate--95.8%.
Health: Infant mortality rate--8.9/1,000. Life expectancy--79 yrs.
Work force (6.0 million); employed 5.5 million: Community, social and individual services--26%; industry--14.4%; commerce--17.6%; agriculture, forestry, and fishing--13.9%; construction--7.1%; financial services--7.5%; transportation and communication--8.0%; electricity, gas and water--0.5%; mining--1.2%.

Government
Type: Republic.
Independence: September 18, 1810.
Constitution: Promulgated September 11, 1980; effective March 11, 1981; amended in 1989, 1993, and 1997.
Branches: Executive--president. Legislative--bicameral legislature. Judicial--Constitutional Tribunal, Supreme Court, court of appeals, military courts.
Administrative subdivisions: 12 numbered regions, plus Santiago metropolitan region, administered by appointed "intendentes," regions are divided into provinces, administered by appointed governors; provinces are divided into municipalities administered by elected mayors.
Political parties: Major parties are grouped into two large coalitions: 1) the center-left "Concertacion", which includes the Christian Democrat Party, the Socialist Party, the Party for Democracy, and the Radical Social Democratic Party; and 2) the center-right "Alliance for Chile", which includes the National Renewal Party and the Independent Democratic Union. The Communist Party joined the Humanistic Party and a number of smaller parties to form the "Together We Can" coalition in 2004, but none of these leftist parties have recently elected congressional representatives.
Suffrage: Universal at 18, including foreigners legally resident for more than 5 years.

Economy (2004)
GDP: $94.1 billion.
Annual real growth rate: 6.1%.
Per capita GDP: $6,000.
Forestry, agriculture, and fisheries (6% of GDP): Products--wheat, potatoes, corn, sugar beets, onions, beans, fruits, livestock, fish.
Commerce (8% of GDP): Sales, restaurants, hotels.
Manufacturing (17% of GDP): Types--mineral refining, metal manufacturing, food processing, fish processing, paper and wood products, finished textiles.
Electricity, gas, and water: 3% of GDP.
Transportation and communication: 7% of GDP.
Construction: 8% of GDP.
Financial services (12% of GDP): Insurance, leasing, consulting.
Mining (13% of GDP): Copper, iron ore, nitrates, precious metals, and molybdenum.
Trade: Exports--$32 billion: copper, fishmeal, fruits, wood products, paper products, fish, wine. Major markets--U.S. 17.3%, EU 23.9%, Japan 11.7%, China 10%, Korea 5.5%, Mexico 4%, Brazil 4.2%. Imports--$23 billion: consumer goods, chemicals, motor vehicles, fuels, electrical machinery, heavy industrial machinery, food. Major suppliers--EU 16.3%, Argentina 16%, U.S. 14.6%, Brazil 10.9%, China 7.6%, Korea 3.8%, Japan 3.1 %.

GEOGRAPHY
The northern Chilean desert contains great mineral wealth, principally copper. The relatively small central area dominates the country in terms of population and agricultural resources. This area also is the cultural and political center from which Chile expanded until the late 19th century, when it incorporated its northern and southern regions. Southern Chile is rich in forests and grazing lands and features a string of volcanoes and lakes. The southern coast is a labyrinth of fjords, inlets, canals, twisting peninsulas, and islands. The Andes Mountains are located on the eastern border.

PEOPLE
About 85% of Chile's population lives in urban areas, with 40% living in greater Santiago. Most have Spanish ancestry. A small, yet influential number of Irish and English immigrants came to Chile during the colonial period. German immigration began in 1848 and lasted for 90 years; the southern provinces of Valdivia, Llanquihue, and Osorno show a strong German influence. Other significant immigrant groups are Italian, Croatian, Basque, and Palestinian. About 800,000 Native Americans, mostly of the Mapuche tribe, reside in the south-central area. The Aymara and Diaguita groups can be found mainly in Chile’s northern desert valleys.

HISTORY
About 10,000 years ago, migrating Indians settled in fertile valleys and along the coast of what is now Chile. The Incas briefly extended their empire into what is now northern Chile, but the area's barrenness prevented extensive settlement. The first Europeans to arrive in Chile were Diego de Almagro and his band of Spanish conquistadors, who came from Peru seeking gold in 1535. The Spanish encountered hundreds of thousands of Indians from various cultures in the area that modern Chile now occupies. These cultures supported themselves principally through slash-and-burn agriculture and hunting. The conquest of Chile began in earnest in 1540 and was carried out by Pedro de Valdivia, one of Francisco Pizarro's lieutenants, who founded the city of Santiago on February 12, 1541. Although the Spanish did not find the extensive gold and silver they sought, they recognized the agricultural potential of Chile's central valley, and Chile became part of the Viceroyalty of Peru.

The drive for independence from Spain was precipitated by usurpation of the Spanish throne by Napoleon's brother Joseph in 1808. A national junta in the name of Ferdinand--heir to the deposed king--was formed on September 18, 1810. The junta proclaimed Chile an autonomous republic within the Spanish monarchy. A movement for total independence soon won a wide following. Spanish attempts to reimpose arbitrary rule during what was called the "Reconquista" led to a prolonged struggle.

Intermittent warfare continued until 1817, when an army led by Bernardo O'Higgins, Chile's most renowned patriot, and Jos? San Mart?n, hero of Argentine independence, crossed the Andes into Chile and defeated the royalists. On February 12, 1818, Chile was proclaimed an independent republic under O'Higgins' leadership. The political revolt brought little social change, however, and 19th century Chilean society preserved the essence of the stratified colonial social structure, which was greatly influenced by family politics and the Roman Catholic Church. A strong presidency eventually emerged, but wealthy landowners remained extremely powerful. Toward the end of the 19th century, the government in Santiago consolidated its position in the south by ruthlessly suppressing the Mapuche Indians. In 1881, it signed a treaty with Argentina confirming Chilean sovereignty over the Strait of Magellan. As a result of the War of the Pacific with Peru and Bolivia (1879-83), Chile expanded its territory northward by almost one-third and acquired valuable nitrate deposits, the exploitation of which led to an era of national affluence. Chile established a parliamentary democracy in the late 19th century, but degenerated into a system protecting the interests of the ruling oligarchy. By the 1920s, the emerging middle and working classes were powerful enough to elect a reformist president, whose program was frustrated by a conservative congress. In the 1920s, Marxist groups with strong popular support arose.

Continuing political and economic instability resulted with the rule of the quasidictatorial Gen. Carlos Ibanez (1924-32). When constitutional rule was restored in 1932, a strong middle-class party, the Radicals, emerged. It became the key force in coalition governments for the next 20 years. During the period of Radical Party dominance (1932-52), the state increased its role in the economy.

The 1964 presidential election of Christian Democrat Eduardo Frei-Montalva by an absolute majority initiated a period of major reform. Under the slogan "Revolution in Liberty," the Frei administration embarked on far-reaching social and economic programs, particularly in education, housing, and agrarian reform, including rural unionization of agricultural workers. By 1967, however, Frei encountered increasing opposition from leftists, who charged that his reforms were inadequate, and from conservatives, who found them excessive. At the end of his term, Frei had accomplished many noteworthy objectives, but he had not fully achieved his party's ambitious goals. In 1970, Senator Salvador Allende, a Marxist and member of Chile's Socialist Party, who headed the "Popular Unity" (UP) coalition of socialists, communists, radicals, and dissident Christian Democrats, won a plurality of votes in a three-way contest and was named President by the Chilean Congress. His program included the nationalization of private industries and banks, massive land expropriation, and collectivization. Allende's program also included the nationalization of U.S. interests in Chile's major copper mines.

Elected with only 36% of the vote and by a plurality of only 36,000 votes, Allende never enjoyed majority support in the Chilean Congress or broad popular support. Domestic production declined; severe shortages of consumer goods, food, and manufactured products were widespread; and inflation reached 1,000% per annum. Mass demonstrations, recurring strikes, violence by both government supporters and opponents, and widespread rural unrest ensued in response to the general deterioration of the economy. By 1973, Chilean society had split into two hostile camps.

A military coup overthrew Allende on September 11, 1973. As the armed forces bombarded the presidential palace, Allende reportedly committed suicide. A military government, led by General Augusto Pinochet, took over control of the country. The first years of the regime in particular were marked by serious human rights violations. A new Constitution was approved by a plebiscite on September 11, 1980, and General Pinochet became President of the Republic for an 8-year term. In its later years, the regime gradually permitted greater freedom of assembly, speech, and association, to include trade union activity. In contrast to its authoritarian political rule, the military government pursued decidedly laissez-faire economic policies. During its 16 years in power, Chile moved away from economic statism toward a largely free market economy that fostered an increase in domestic and foreign private investment. In a plebiscite on October 5, 1988, General Pinochet was denied a second 8-year term as president. Chileans voted for elections to choose a new president and the majority of members of a two-chamber congress. On December 14, 1989, Christian Democrat Patricio Aylwin, the candidate of a coalition of 17 political parties called the Concertacion, was elected president. Aylwin served from 1990 to 1994 and was succeeded by another Christian Democrat, Eduardo Frei Ruiz-Tagle (son of the previous President), leading the same coalition, for a 6-year term. Ricardo Lagos Escobar of the Socialist Party and the Party for Democracy led the Concertacion to a narrower victory in 2000 presidential elections. His term ends in 2006.

GOVERNMENT AND POLITICAL CONDITIONS
Chile's Constitution was approved in a September 1980 national plebiscite. It entered into force in March 1981. After Pinochet's defeat in the 1988 plebiscite, the Constitution was amended to ease provisions for future amendments to the Constitution. Many among Chile's political class see further constitutional reform as necessary to complete the transition to democracy. Reforms that are currently under consideration include the abolition of non-elected Senators (institutional senators, or senators for life) and securing the Presidential right to remove the Commander in Chief of the Armed Forces. A number of these reforms have been approved by the Senate and are awaiting action by the lower house.

Chile's bicameral Congress has a 48-seat Senate--38 elected, 9 appointed, 1 for life--and a 120-member Chamber of Deputies. Deputies are elected every 4 years. Senators serve for 8 years with staggered terms. The current Senate is evenly split 24-24 between pro-government and opposition Senators. Nine institutional senators were appointed in 1999, and two "senators for life," former Presidents Pinochet (who resigned in 2002) and Frei. (Chile's Constitution provides that former presidents who have served at least 6 years shall be entitled to a lifetime senate seat.) The last congressional elections were held in December 2001. The current lower house--the Chamber of Deputies--contains 60 members of the governing center-left coalition and 56 from the center-right opposition. Currently 4 Deputies have their voting rights suspended on legal grounds. The Congress is located in the port city of Valparaiso, about 140 kilometers (84 mi.) west of the capital, Santiago.

Chile's congressional elections are governed by a unique binomial system that rewards coalition slates. Each coalition can run two candidates for the two Senate and two lower chamber seats apportioned to each chamber's electoral districts. Typically, the two largest coalitions split the seats in a district. Only if the leading coalition ticket out-polls the second-place coalition by a margin of more than 2-to-1 does the winning coalition gain both seats. In the 2001 congressional elections, the conservative Independent Democratic Union surpassed the Christian Democrats for the first time to become the largest party in the lower house. The Communist Party again failed to gain any seats in the 2001 elections.

The next presidential and congressional elections are set for December 2005.

Chile's judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and the Supreme Court. Chile will complete in mid-2005 a multi-year overhaul of its criminal justice system. The reform has replaced inquisitorial proceedings with an adversarial system more similar to that of the United States.

Principal Government Officials
President--Ricardo LAGOS Escobar
Minister of Foreign Affairs--Ignacio WALKER Prieto
Ambassador to the United States--Andr?s BIANCHI Larre
Ambassador to the Organization of American States (OAS)--Esteban TOMIC Errazuriz
Ambassador to the United Nations--Heraldo MUNOZ Valenzuela

Chile maintains an embassy in the United States at 1732 Massachusetts Avenue, NW, Washington, DC 20036; tel: 202-785-1746, fax: 202-659-9624, email: embassy@embassyofchile.org.

DEFENSE
Chile's Armed Forces are subject to civilian control exercised by the President through the Minister of Defense. Under the 1980 Constitution, the services enjoy considerable autonomy, and the President cannot remove service commanders on his own authority.

Army
The commander in chief of the Chilean Army is Maj. Gen. Juan Emilio Cheyre. The Chilean Army is 45,000 strong and is organized with an Army headquarters in Santiago, seven divisions throughout its territory, an Air Brigade in Rancagua, and a Special Forces Command in Colina. The Chilean Army is one of the most professional and technologically advanced armies in Latin America.

Navy
Adm. Miguel Vergara directs the 25,000-person Navy, including 5,000 Marines. Of the fleet of 29 surface vessels, only six are operational major combatants (destroyers and frigates). Those ships are based in Valparaiso. The Navy operates its own aircraft for transport and patrol; there are no Navy fighter or bomber aircraft. The Navy also operates three submarines based in Talcahuano.

Air Force (FACH)
Gen. Osvaldo Sarabia heads a force of 12,500. Air assets are distributed among five air brigades headquartered in Iquique, Antofagasta, Santiago, Puerto Montt, and Punta Arenas. The Air Force also operates an airbase on King George Island, Antarctica. The FACH will begin taking delivery of 10 U.S. f-16 aircraft in 2006.

Carabineros
After the military coup in September 1973, the Chilean national police (Carabineros) were incorporated into the Defense Ministry. With the return of democratic government, the police were placed under the operational control of the Interior Ministry but remained under the nominal control of the Defense Ministry. Gen. Alberto Cienfuegos is the head of the national police force of 30,000 men and women who are responsible for law enforcement, traffic management, narcotics suppression, border control, and counter-terrorism throughout Chile.

ECONOMY
After a decade of impressive growth rates, Chile experienced a moderate downturn in 1999 brought on by the global economic slowdown. The economy remained sluggish until 2003, when it began to show clear signs of recovery, achieving 3.3% real GDP growth. The Chilean economy finished 2004 with growth of 6.1%. Most experts expect GDP growth of around 6% in 2005.

Chile has pursued generally sound economic policies for nearly three decades. The 1973-90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization at a slower pace. The government's role in the economy is mostly limited to regulation, although the state continues to operate copper giant Codelco and a few other enterprises. Chile is strongly committed to free trade and has welcomed large amounts of foreign investment. Chile has signed Free Trade agreements with several important economies, including an FTA with the United States, which was signed in 2003 and implemented in January 2004. High domestic savings and investment rates also helped propel Chile's economy to average growth rates of 8% during the 1990s. The privatized national pension system has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 21% of GDP in 2003.

Unemployment has hovered in the 8%-10% range in recent years, well above the 5%-6% average for the 1990s. Unemployment remained at 8.8% at the end of 2004 in spite of strong economic growth. Wages have risen faster than inflation as a result of higher productivity, boosting national living standards. The share of Chileans with incomes below the poverty line--defined as twice the cost of satisfying a person's minimal nutritional needs--fell from 46% of the population in 1987 to 18.8% in 2003.

Chile's independent Central Bank pursues a policy of maintaining inflation between 2% and 4%. Inflation has not exceeded 5% since 1998. Chile registered inflation of 2.4% in 2004 and is expected to see a 2.5% increase in 2005. Most wage settlements and spending decisions are indexed, reducing inflation's volatility. Under the compulsory private pension system, most formal sector employees pay 10% of their salaries into privately managed funds.

Total foreign direct investment rose to $7.1 billion in 2004, up from $2.5 billion in 2003. Both foreign and domestic investment in Chile had declined during the country’s period of slower economic growth from 1999-2003, but appear to be recovering strongly. The Chilean Government committed in early 2002 to undertake a series of microeconomic reforms designed to create new incentives for private investment. The government also has encouraged the use of Chile as an "investment platform" for multinational corporations planning to invest in the region. Chile's welcoming attitude toward foreign direct investment is codified in the country's Foreign Investment Law, which gives foreign investors the same treatment as Chileans. Registration is simple and transparent, and foreign investors are guaranteed access to the official foreign exchange market to repatriate their profits and capital. The U.S.-Chile Free Trade Agreement (FTA) offers a number of other investor protections.

Foreign Trade
Chile's economy is highly dependent on international trade. In 2004, exports accounted for about 34% of GDP. Chile has traditionally been dependent upon copper exports; the state-owned firm CODELCO is the world's largest copper-producing company. Nontraditional exports have grown faster than those of copper and other minerals. In 1975, non-mineral exports made up just over 30% of total exports, whereas now they account for about 60%. The most important non-mineral exports are forestry and wood products, fresh fruit and processed food, fishmeal and seafood, and wine. The trade balance for 2004 showed a historic surplus $9 billion, considerably higher than 2003. Total exports in 2004 were $32 billion, a 52.1% increase from $20.4 billion in 2003. Chile's export markets are fairly balanced among Europe (25.1%), Asia (33.1%), Latin America (15.7%), and North America (19%). The U.S., the largest national market, takes in 17.3% of Chile's exports. Asia has been the fastest-growing export market in recent years.

Chilean imports increased 30% in 2004, to $23 billion, reflecting a positive change in consumer demand and economic recovery. Capital goods made up about 66% of total imports. The United States represented 14.6% of Chilean imports in 2004. As a bloc, the EU in 2004 supplied 16.3% of Chile's imports, while Argentina contributed 16%. Chile unilaterally lowered its across-the-board import tariff--for all countries with which it does not have a trade agreement--to 6% in 2003.

Higher effective tariffs are charged only on imports of wheat, wheat flour, and sugar as a result of a system of import price bands. The price bands were ruled inconsistent with Chile's WTO obligations in 2002 and the government has introduced legislation to modify them. Chile will have to phase out the price bands within 12 years under the terms of the U.S.-Chile FTA.

Successive Chilean governments have actively pursued liberalizing trade agreements. During the 1990's, Chile signed FTA's with Canada, Mexico, and Central America. Chile also concluded preferential trade agreements with Venezuela, Colombia, and Ecuador. An association agreement with Mercosur--Argentina, Brazil, Paraguay, and Uruguay--went into effect in October 1996. Chile, a member of the Asia-Pacific Economic Cooperation (APEC) organization, is seeking to boost commercial ties to Asian markets. Continuing its export-oriented development strategy, Chile completed landmark free trade agreements in 2002 with the European Union and South Korea. After two years of negotiations, the United States and Chile signed an agreement in June 2003. The agreement will lead to completely duty free bilateral trade within 12 years. The U.S.-Chile FTA entered into force January 1, 2004 following approval by the U.S and Chilean congresses. Chile is a strong proponent of pressing ahead on negotiations for a Free Trade Area of the Americas (FTAA). Chile is currently negotiating trade agreements with China and India, as well as a tri-partite agreement with Singapore and New Zealand.

Finance
Chile's financial sector has grown faster than other areas of the economy over the last few years; a banking reform law approved in 1997 broadened the scope of permissible foreign activity for Chilean banks. The Chilean Government implemented a further liberalization of capital markets in 2001. Chileans have enjoyed the recent introduction of new financial tools such as home equity loans, currency futures and options, factoring, leasing, and debit cards. The introduction of these new products has been accompanied by increased use of traditional instruments such as loans and credit cards. Chile's private pension system, with assets worth roughly $54 billion in late 2004, has provided an important source of investment capital for the capital market. Chile maintains one of the best credit ratings (S+P A+) in Latin America. There are three main ways Chilean firms raise funds abroad: bank loans, issuance of bonds, and the selling of stock on U.S. markets through American Depository Receipts (ADR's). Nearly all of the funds raised go to finance investment. The government is paying down its foreign debt. The combined public and private foreign debt was roughly over 50% of GDP at the end of 2004--low by Latin American standards.