Historical Sketch

In the 16th century, the Spanish possessions in Peru were gradually extended southward. The newly conquered lands were consolidated into the Viceroyalty of the Rio de la Plata in 1776, consisting of the three audiences of Buenos Aires, Charcas, and Santiago. The latter was remodelled into the Captaincy General of Chile two years later. During the Napoleonic occupation of Spain, Chile unilaterally declared autonomy within the Spanish state as Kingdom of Chile in 1810. The Spanish reconquest finally failed in 1818, and Chile attained full independence. The southern territories remained unclaimed for another half a century. In 1860, the French adventurer Orélie-Antoine Thounem proclaimed himself King Aurel-Anton I of "Araucania and Patagonia", the southern lands west and east of the Andes. Chile quickly occupied so-called "Araucania" in 1862, while Argentina did not move as the claim for "Patagonia" was not considered a threat.

Monetary History Overview

During the war of independence, the provisional government decreed the issuance of silver coins for "Independent Chile" in June 1817, more for propaganda than monetary policy. The first coinage law was enacted in 1834, which established the 1st Chilean Peso as national currency in the Spanish bimetallic standard was kept. The coinage was a mix of the traditional octal and the decimal system. The subsequent coinage laws of 1851 and 1860 changed the gold-to-silver ratio and switched to metrical weights and full decimalization. In 1860, several commercial banks were granted the right to issue paper money. This triggered a first monetary crisis in 1878, when paper money became inconvertible. Government paper money appeared a year later, adding to the over-issuance. Several attempts were made to withdraw at least part of the paper money, but they all failed. A brief currency stabilization was achieved in 1895, when the Peso was devalued and pegged to the Pound Sterling. All the circulating paper was withdrawn and redeemed against gold until May 1897, the private paper money issuance was abolished. However, a year later the gold standard was suspended again, and the state paper money became inconvertible again. After that, it took almost thirty years until another attempt at currency stabilization was tried. In 1925, the Central Bank of Chile was established to take over from the government. The Peso was devalued and stabilized through a peg to the Pound Sterling. Again only for short time since in the course of the world economic crisis Chile had abandon the gold standard in April 1932. The Peso subsequently lost 80% of its value until 1939, when a multi-tier exchange rate structure had been established. In 1946, Chile entered the Bretton-Woods system which briefly stabilized the Peso, but already in 1948 the rate had to be split again with an official rate of restricted applicability. In 1953, the Peso was devalued by more than 70% and the unified rate was established. However, three years later the Peso was floated and depreciated by 90% until the end of the decade. In 1960, a currency reform was carried out. Three zeros were cut, and the Chilean Escudo became the new currency unit. Stability lasted until 1962, when first a slow decline in value set in that turned into hyperinflation in the early 1970s. In 1975, another three zeros were cut, and the new currency of the 2nd Chilean Peso got created. This time, stability lasted for four years, and in 1979 another strong depreciation set in. It slowed down somewhat in the mid-1980s but continued for another two decades. Since the early 2000s, the depreciation has slowed down but the Peso still lost 30% of value against the US Dollar until the 2020s.

Chile joined the International Monetary Fund (IMF) on 31.12.1945.

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