Economy History of Chile

Economic history of Chile

Colonial era to 1690

In colonial times, the segmentation of Chile into latifundios left only small parcels for native American and mestizo villagers to cultivate. Cattle raised on the latifundios were a source of tallow and hides, which were sent, via Peru, to Spain. Wheat was Chile's principal export during the colonial period. From the inquilinos (peons), indentured to the encomenderos, or latifundio owners, to the merchants and encomenderos themselves, a chain of dependent relations ran all the way to the Spanish metropolis.

The government played a significant role in the colonial economy. It regulated and allocated labor, distributed land, granted monopolies, set prices, licensed industries, conceded mining rights, created public enterprises, authorized guilds, channeled exports, collected taxes, and provided subsidies. Outside the capital city, however, colonists often ignored or circumvented royal laws. In the countryside and on the frontier, local landowners and military officers frequently established and enforced their own rules.

The economy expanded under Spanish rule, but some criollos complained about royal taxes and limitations on trade and production. Although the crown required that most Chilean commerce be with Peru, smugglers managed to sustain some illegal trade with other American colonies and with Spain itself. Chile exported to Lima small amounts of gold, silver, copper, wheat, tallow, hides, flour, wine, clothing, tools, ships, and furniture. Merchants, manufacturers, and artisans became increasingly important to the Chilean economy.

Mining was significant, although the volume of gold and silver extracted in Chile was far less than the output of Peru or Mexico. The conquerors appropriated mines and washings from the native people and coerced them into extracting the precious metal for the new owners. The crown claimed one-fifth of all the gold produced, but the miners frequently cheated the treasury. By the seventeenth century, depleted supplies and the conflict with the Araucanians reduced the quantity of gold mined in Chile.

Because precious metals were scarce, most Chileans worked in agriculture. Large landowners became the local elite, often maintaining a second residence in the capital city. Traditionally, most historians have considered these great estates (called haciendas or fundos) inefficient and exploitive, but some scholars have claimed that they were more productive and less cruel than is conventionally depicted.

The haciendas initially depended for their existence on the land and labor of the indigenous people. As in the rest of Spanish America, crown officials rewarded many conquerors according to the encomienda system, by which a group of native Americans would be commended or consigned temporarily to their care. The grantees, called encomenderos, were supposed to Christianize their wards in return for small tribute payments and service, but they usually took advantage of their charges as laborers and servants. Many encomenderos also appropriated native lands. Throughout the sixteenth and seventeenth centuries, the encomenderos fended off attempts by the crown and the church to interfere with their exploitation of the indigenous people.

The Chilean colony depended heavily on coerced labor, whether it was legally slave labor or, like the wards of the encomenderos, nominally free. Wage labor initially was rare in the colonial period; it became much more common in the eighteenth and nineteenth centuries. Because few native Americans or Africans were available, the mestizo population became the main source of workers for the growing number of latifundios, which were basically synonymous with haciendas.

Those workers attached to the estates as tenant farmers became known as inquilinos. Many of them worked outside the cash economy, dealing in land, labor, and barter. The countryside was also populated by small landholders (minifundistas), migrant workers (afuerinos), and a few Mapuche holding communal lands (usually under legal title).

Bourbon reforms

The Habsburg dynasty's rule over Spain ended in 1700. The Habsburgs' successors, the French Bourbon dynasty, reigned for the rest of the colonial period. In the second half of the eighteenth century, they tried to restructure the empire to improve its productivity and defense. The main period of Bourbon reforms in Chile lasted from the coronation of Charles III (1759-88) in Spain to the end of Governor Ambrosio O'Higgins, Marquis of Osorno's tenure in Chile (1788-96).

The Bourbon rulers gave the audiencia of Chile (Santiago) greater independence from the Viceroyalty of Peru. One of the most successful governors of the Bourbon era was the Irish-born O'Higgins, whose son Bernardo O'Higgins