A detailed policy blueprint known as El Ladrillo ("The Brick")—completed shortly before the coup—became influential inside the dictatorship. It helped organize proposals for freer prices, trade opening, and a reduced state role, providing a roadmap for the later neoliberal reform package.
On this day the Chilean armed forces overthrew President Salvador Allende and established a military junta led by Augusto Pinochet. The new regime suspended Congress and sharply restricted political activity, creating the authoritarian setting in which major economic reforms could be enacted quickly.
The junta issued Decree Law 600 to create a new legal framework for direct foreign investment. This law signaled a shift toward opening Chile’s economy to outside capital and became a key building block for later export- and market-oriented reforms.
During the mid-to-late 1970s, Chile rapidly reduced protectionism and removed many quantitative import restrictions and exchange controls. Research summaries of this period note that tariffs fell from very high averages in the early 1970s to a uniform low tariff by 1979, reshaping incentives toward exports and competition.
Pinochet appointed economist Sergio de Castro as Minister of Economy, strengthening the influence of the “Chicago Boys” within the government. His appointment marked a transition toward a more systematic, market-driven reform program centered on stabilization and liberalization.
By June 1979, Chile set nearly all tariffs to a uniform 10% rate (with limited exceptions such as automobiles). This step deepened unilateral trade liberalization and locked in a simpler, more open trade regime than Chile had previously maintained.
The government fixed the exchange rate at 39 pesos per U.S. dollar, aiming to bring down inflation by anchoring prices to the dollar. Over time, the fixed rate contributed to an overvalued currency and rising financial vulnerability as external conditions worsened.
Chile held a constitutional referendum that approved a new constitution under dictatorship conditions and without normal democratic safeguards. The constitution set rules for a long transition, including a future plebiscite on whether Pinochet would continue in power, linking political institutions to the economic model being built.
Decree Law 3500 created a new pension system based on mandatory individual accounts managed by private pension fund administrators (AFPs). This reform shifted retirement financing away from a traditional pay-as-you-go model and became one of the best-known structural changes of the Pinochet era.
After recession and mounting debt pressures, Chile abandoned the fixed exchange rate and faced a severe financial crisis. In early 1983 the government intervened in multiple private banks and closed others, showing limits of the earlier liberalization and forcing the state back into a rescue role.
Voters rejected extending Pinochet’s rule in the 1988 plebiscite, a turning point that set the constitutional transition toward elections. The result forced negotiations over how political power would shift while many economic institutions created under the dictatorship remained in place.
Chile approved a package of constitutional amendments negotiated between the regime and much of the opposition. The changes limited some emergency powers and adjusted political rules ahead of the return to elected civilian government, helping define how the Pinochet-era system would carry into democracy.
Patricio Aylwin took office as president, marking the formal end of Pinochet’s military government. By this point, core neoliberal reforms—such as open trade, a foreign-investment framework, and the AFP pension system—had become embedded, shaping the policy debates of the new democratic period.
Chilean economic reforms under Augusto Pinochet (1973–1990)