In the first year of Allende's term, the short-term economic results of Economics Minister Pedro Vuskovic's expansive monetary policy were unambiguously favorable: 12% industrial growth and an 8.6% increase in GDP, accompanied by major declines in inflation (down from 34.9% to 22.1%) and unemployment (down to 3.8%). Allende adopted measures including price freezes, wage increases, and tax reforms, which had the effect of increasing consumer spending and redistributing income downward. Joint public-private public works projects helped reduce unemployment.
Much of the banking sector was nationalized. Many enterprises within the copper, coal, iron, nitrate, and steel industries were expropriated, nationalized, or subjected to state intervention. Industrial output increased sharply and unemployment fell during the administration's first year. However, these results were not sustainable and in 1972 the Chilean escudo had runaway inflation of 140%. An economic depression that had begun in 1967 peaked in 1972, exacerbated by capital flight, plummeting private investment, and withdrawal of bank deposits in response to Allende's socialist program. Production fell and unemployment rose. The combination of inflation and government-mandated price-fixing led to the rise of black markets in rice, beans, sugar, and flour, and a "disappearance" of such basic commodities from supermarket shelves.[22]
The Cuban packages scandal revealed arms smuggling from the Communist Cuba to Chile;[citation needed] Allende – surrounded by KGB advisors – had turned Chile into a center for Soviet operations in Latin America.[1][2][23][24][25] Salvador Allende now had a personal KGB adviser. According to Allende's KGB file, Allende "was made to understand the necessity of reorganising Chile's army and intelligence services, and of setting up a relationship between Chile's and the USSR's intelligence services".[23]
The nationalization of U.S. and other foreign-owned companies led to increased tensions with the United States. As a result, the Richard Nixon administration organized and inserted secret operatives in Chile, in order to quickly destabilize Allende's government.[21][26][27][28][29] In addition, Nixon gave instructions to make the Chilean economy scream,[23] and international financial pressure restricted economic credit to Chile. Simultaneously, the CIA funded opposition media, politicians, and organizations, helping to accelerate a campaign of domestic destabilization.[30] By 1972, the economic progress of Allende's first year had been reversed, and the economy was in crisis. Political polarization increased, and large mobilizations of both pro- and anti-government groups became frequent, often leading to clashes.
By 1973, Chilean society had grown highly polarized, between strong opponents and equally strong supporters of Salvador Allende and his government. Military actions and movements, separate from the civilian authority, began to manifest in the countryside. A failed military coup was attempted against Allende in June 1973.[31]
In its "Agreement", on August 22, 1973, the Chamber of Deputies of Chile asserted that Chilean democracy had broken down and called for "redirecting government activity", to restore constitutional rule. Less than a month later, on September 11, 1973, the Chilean military deposed Allende, who apparently shot himself in the head to avoid capture[21][32] as the Presidential Palace was surrounded and bombed. Subsequently, rather than restore governmental authority to the civilian legislature, Augusto Pinochet exploited his role as Commander of the Army to seize total power and to establish himself at the head of a junta.
Controversy surrounds alleged CIA involvement in the coup.[33] As early as the Church Committee Report (1975), publicly available documents have indicated that the CIA attempted to prevent Allende from taking office after he was elected in 1970; the CIA itself released documents in 2000 acknowledging this and that Pinochet was one of their favored alternatives to take power.[34]...
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After the coup, Chileans witnessed a large-scale repression, which started as soon as October 1973, with at least 70 persons murdered by the Caravan of Death.[44][45] The four-man junta headed by General Augusto Pinochet abolished civil liberties, dissolved the national congress, banned union activities, prohibited strikes and collective bargaining, and erased the Allende administration's agrarian and economic reforms.[46] The junta jailed, tortured, and executed thousands of Chileans. According to the Rettig commission and the Valech Report, close to 3,200 were executed or "disappeared",[47] and at least 29,000 imprisoned and tortured.[48] According to the Latin American Institute on Mental Health and Human Rights (ILAS), "situations of extreme trauma" affected about 200,000 persons.;[49][50] this figure includes individuals killed, tortured or exiled, and their immediate families...
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