Chile

Chile exists because it was too poor to attract Spanish attention—and because economists from the University of Chicago designed the purest neoliberal experiment in history under military dictatorship. This long, thin country stretching 4,300 kilometers along the Pacific was the 'least wealthy realm of the Spanish Crown' for most of its colonial history, lacking the mineral wealth that made Peru and Mexico prize possessions. At the end of the sixteenth century, fewer than 5,000 Spanish settlers lived here.

Pedro de Valdivia founded Santiago on February 12, 1541, establishing a colonial economy based on agriculture and mining. Independence came on September 18, 1810, when Chilean revolutionaries, inspired by Napoleon's capture of Ferdinand VII, declared autonomy. José de San Martín and Bernardo O'Higgins led combined Argentine-Chilean forces to defeat Spanish armies; formal independence was declared on February 12, 1818. Spain didn't recognize it until 1844. What followed was relative stability by Latin American standards—Chile avoided the caudillo chaos that plagued neighbors—though the War of the Pacific (1879-1884) against Peru and Bolivia brought the copper-rich Atacama Desert under Chilean control, setting the stage for modern resource dependency.

The twentieth century brought class conflict and Cold War dynamics to a head. When Salvador Allende, a lifelong Marxist, was democratically elected in 1970, he nationalized copper mines, expanded workers' control, and redistributed land. Nixon ordered the CIA to 'make the economy scream.' On September 11, 1973, General Augusto Pinochet overthrew Allende in a US-backed coup. What followed was seventeen years of military dictatorship—and a laboratory for neoliberalism.

The 'Chicago Boys,' Chilean economists trained at the University of Chicago under Milton Friedman, implemented reforms that would have been politically impossible in any democracy. 'Shock treatment' in 1975 crashed inflation from 350% to manageable levels while crashing livelihoods: unemployment averaged 18% during the regime, poverty reached 68%. Chile was liberalized, privatized, opened to world markets. The experiment worked in macroeconomic terms—growth resumed, inflation stabilized—but at enormous social cost. The richest 1% of Chileans still capture 28.1% of total income, making Chile the third most unequal country in the world. The neoliberal model outlasted Pinochet's 1990 exit, maintained by center-left and center-right governments alike for three decades.

Gabriel Boric's 2022 election as a leftist millennial president represented a break—or an attempted one. His administration tried twice to replace the Pinochet-era constitution: voters rejected a progressive draft in September 2022 and a conservative alternative in December 2023. Boric has indicated no third attempt will come. His major achievement was the January 2025 pension reform, finally passed after decades of stalemate, increasing guaranteed pensions and adjusting risk by age while maintaining private sector involvement.

The economy remains copper-dependent but sees lithium as the next frontier. Boric's April 2023 lithium nationalization sought to expand state control over this strategic resource essential for electric vehicle batteries. Yet private investment remains necessary—six priority areas were designated for private-led extraction in September 2024. Copper prices are projected at $4.30 per pound through 2026; Chile holds the world's largest copper reserves and significant lithium deposits.

By November 2025 elections, Boric—at 28% approval and constitutionally barred from consecutive terms—will have presided over GDP growth of 1.8% annually, inflation dropped from 12% to 4.3%, and a failed constitutional project. The next president, inaugurated March 2026, inherits an economy well-positioned for the green energy transition but a society still bearing scars from the Chicago Boys' experiment. Chile proved that neoliberalism could generate growth; it also proved that growth without redistribution creates instability that eventually demands political correction.