Crisis of 1982

The Crisis of 1982 was a major economic crisis suffered in Chile. The crisis took place during the time of the Chilean military dictatorship following years of radical neoliberal reforms. The 1982 crisis was the worst economic crisis in Chile since the 1930s. The GDP of Chile retracted 14.3% and unemployment rose to 23.7%.

After the socialist presidency of Salvador Allende (1970—1973), and following the 1973 coup the Chicago boys implemented the neoliberal economical policies outlined in El ladrillo. In 1979 however, Chile decided to depart from the neoliberal principle of free floating exchange rates, with disastrous results.

The lead up to the 1982 crisis can be traced to the overvalue of the Chilean peso (which was helped by the peg of the peso to the United States dollar) and to high interest rates in Chile. This would have hampered investment in productive activities. In fact in the 1977—1982 period much of the spending in Chile consisted in consuming goods and services. From 1973 to 1982 Chile's external debt rose from 3500 to over 17 billion dollars.

In agriculture the entrance of speculative capital in the pre-crisis period lead to the bankruptcy of several processing companies.IANSA, a sugar company that belonged to the state before privatization, went bankrupt due to a short-term gains policy by its new owners.

In November 1981, two banks were bailed out by the government on the basis of having taken excessive risks, these were large Banco de Talca and Banco Español Chile and the minor banks Banco de Linares and Banco de Fomento de Valparaíso. The financial societies of Compañía General, Cash, Capitales and del Sur were also bailed out. Banco de Talca and Banco Español Chile were nationalized removing the management and wresting ownership from shareholders, later these two banks were re-privatized.

...
Wikipedia