When Pinochet came to power, in order to overcome the severe economic crisis he was facing, he invited a team of more than a hundred economists to form a group of advisors, who were heavily influenced by the "Chicago School". They made a careful study of the Chilean economy. They believed that after the mid-1960s, due to the loss of vitality of the "import substitution" development model and the mistakes of the Allende government's economic policies, the Chilean economy slipped to the brink of collapse, and suggested the adoption of the theories of the "Chicago School", the implementation of export-oriented development model and the opening up of the free market economy. They proposed to adopt the theories of the Chicago School and adopt an export-oriented development model and a free-market economic policy open to the outside world. At the same time, they proposed to invite their mentor, Milton Friedman, to Chile to give lectures to policy makers and business magnates, and he arrived in March 1975 to a warm welcome. In three days of lectures, he outlined ways to develop a market economy by privatizing most government-affiliated institutions, drastically cutting government spending, and encouraging foreign trade and foreign capital investment. To implement such major changes, Friedman advised not to procrastinate, but to act boldly and immediately. He called it "shock therapy". He recognizes the high social cost of this approach in the short term. The tightening of monetary policy would reduce demand, increase unemployment and worsen poverty. However, Freeman predicted that the economy would turn around completely, benefiting everyone. According to this view, Chile's long-term development problems would finally be solved, and Pinochet, believing that Friedman's approach was feasible, instituted a series of neoliberal reforms accordingly. First, a policy of privatization was introduced. All private enterprises and banks expropriated by the Allende government were returned to their original owners, and the vast majority of state enterprises were auctioned off to private individuals; land expropriated by the previous two governments in the agrarian reform was returned to its original owners or auctioned off. In 1974, the Chilean government began a major drive to privatize state-owned enterprises; in 1973, there were 596 state-owned enterprises in Chile, and by 1989, 551 of them had been privatized, leaving only 45 strategically important enterprises, such as copper, oil, water, and nuclear infrastructure, in the hands of the state.
In order to reduce the state's direct intervention in the economy and give full play to the market mechanism, the military government has taken the following measures: first, reducing the scope of state pricing and eliminating price controls. In order to reallocate resources through market prices and improve production efficiency so that prices can correctly reflect market dynamics, Chile eliminated long-standing state subsidies on prices and controls on most prices on the domestic market. Within a month of the military coming to power, the prices of more than 3,000 commodities were liberalized. By 1978, the state had gone from controlling the prices of more than 20,000 commodities to controlling the prices of only eight. Second, deregulation of the financial sector. In response to the situation that most of the domestic commercial banks and financial markets were controlled by the state during Allende's administration, the military government carried out a profound reform of the financial system in order to establish a liberalized capital market free from direct state intervention and to make it compatible with the existing economic system. The reform of the Chilean financial system was carried out in three steps. The first step was the liberalization of interest rates for private financial institutions, and in 1974 the Government issued a decree permitting the establishment of private financial companies to operate deposit and loan businesses with free interest rates. State-owned banks and financial companies, on the other hand, were controlled in their business activities, including interest rates and reserve ratios, and could only apply the maximum interest rates stipulated in the decree. Under these circumstances, a large amount of capital has flowed into private financial institutions with high interest rates. The second step was the privatization of banks; in 1975, the State began to auction off most of the banks run by the State Production and Development Corporation (SPDC) to private consortia at preferential prices. At the same time, the government deregulated bank interest rates and imposed a uniform reserve ratio. By the end of 1978, there was only one state-owned bank left in Chile. In addition, the operations of the former "People's Savings" system and credit unions were tightly controlled. The third step was to liberalize the conditions under which domestic financial institutions could obtain foreign loans. The reform of the Chilean financial system strengthened the power of the country's private financial consortia. They took advantage of the high interest rates charged by Chilean banks at the time to make extremely lucrative profits in financial trade. In addition, the Chilean Government has also improved the legal system of the service market to create conditions for giving full play to the regulatory role of the market mechanism. Second, reduce tariffs. For a long time, Chile is a high tariff protection country, in 1973, the average tariff rate in Chile is 94%, the highest tariff rate is 500%. in 1974, Chile gave up the high tariff protection policy for 40 years, and spent five and a half years to reduce tariffs significantly, and completed the plan of tax reform. in June 1979, Chile adopted a 10% uniform tariff (except for automobiles). At the same time, measures such as preferential exchange rates, import restrictions, and import prepayments were eliminated. By this time, Chile became the country with the lowest tariffs in Latin America.
When the military government implemented tax reform, it set up a value-added tax, increased direct taxes, and strengthened measures against tax theft and evasion, so that the country's revenues improved. At the same time, a series of measures were taken to reduce fiscal expenditures, resulting in fiscal surpluses in some years.
In the late 1980s, thanks to the government's timely and targeted measures, the economy recovered and developed relatively quickly, and the country's finances turned from deficit to surplus. Thirdly, to attract foreign investment, after the military came to power in 1973, a new development model based on trade liberalization and the opening up of the domestic market was introduced to actively encourage the development of private enterprises. Under such circumstances, Chile took the lead in Latin America in making substantial adjustments to its foreign investment policy, putting the introduction and utilization of foreign investment at a strategic level of economic development and greatly relaxing the restrictions on foreign investment that had previously been imposed from a nationalist perspective. 1974, the military government enacted the Foreign Investment Law, known as Decree No. 600, which was characterized by its openness and non-discriminatory policy toward foreign investment. ". It implemented a series of preferential policies for foreign investment, giving foreign investors more concessions, investment areas and opportunities, and proactively attracting foreign investment. Since then, the Foreign Investment Law has been continuously revised, stipulating that foreign capital is treated equally with domestic capital. In October 1976, Chile withdrew from the Andean Group, thereby exempting itself from the implementation of the Group's "Resolution No. 24" on the restriction of foreign investment, and in October 1977, the Chilean government amended the International Exchange Act to allow commercial banks to pay foreign liabilities to foreigners. In October 1977, the Chilean government amended the International Exchange Act to allow commercial banks to freely remit foreign currency for debt service guaranteed by the state for external liabilities equal to 50 percent of their assets and reserves.
In the early 1980s, Chile was faced with debt crisis and economic difficulties, the military government made timely adjustments and additions to the foreign investment policy. 1982, the surtax levied on foreign investment was reduced from 40% to 33%; in order to reduce the burden of debt, the Chilean government enacted "Article 19" in May 1985 on the capitalization of foreign debt. In order to reduce the debt burden, in May 1985 the Chilean Government issued "Article 19" on the capitalization of external debt, which encouraged the capitalization of external debt as a means of attracting foreign investment and reducing debt. At the same time, the Corporate Tax Code was amended to include a series of provisions aimed at reducing taxes and facilitating capital repatriation and profit repatriation. Creditors' debt securities were converted into direct investment through debt capitalization and concessions were granted to them for profit repatriation and capital repatriation. As a result, the debt stock was reduced and foreign investment was attracted, and since the late 1980s Chile has become one of the most favored Latin American countries by foreigners, with an investment risk rating of A by Standard & Poor's, due to the increasing stability of the macroeconomic situation and the accelerated pace of economic growth. Fifth, social reforms were undertaken. The military government demanded that trade unions be completely separated from the party and politics, and disbanded a number of Marxist-leaning trade union organizations.A new labor policy was promulgated in January 1979, stipulating that trade unions were allowed to be organized only on an enterprise-by-enterprise basis, that negotiations on labor contracts could only take place within the enterprise, that the government had the right to use compulsory arbitration to settle labor disputes, and that enterprise owners had the right to hire replacement workers in the event of a strike lasting more than 60 days. striking workers, and the abolition of labor courts, which allow employers to fire workers at will and pay overtime only to those who work 12 or more consecutive hours, have weakened workers' legal rights.
When the military government came to power, it undertook a major reform of the pension system, issuing Decree No. 3500 in November 1980, which formally designed a new pension system that privatized the management of pensions, capitalized individual pensions, established individual accounts, and emphasized the principle of self-accumulation and self-insurance by workers. At the same time, the health security system was reformed to include a system of health security managed by private organizations, with the establishment of the National Public **** Health System in 1979 and the Privately Managed Health Security Agency in 1981. This system has provided many people with better medical care, improved women's prenatal, post-natal and infant health care, reduced the infant mortality rate from 8.2 per cent in 1970 to 1.5 per cent in 1990, i.e. by a factor of five, increased adult life expectancy from the initial 65 to 71 years, and increased urban drinking water coverage from 67 per cent to 98 per cent. During Pinochet's administration, agriculture developed significantly, with fisheries and forestry growing especially. 1974 saw the first forestry law enacted by the military government, which stipulated that if a natural or legal person planted a tree in a barren mountainous area, the state would accept it, and if it met the standards, the state would pay for 75% of the cost of planting the tree and pay it back in one lump sum. The state is responsible for providing good tree species and granting low-interest loans to afforestation workers for a period of 15 to 20 years; exempting land tax for the first 25 years before the planted forests are ready to yield timber, and reducing land tax by 50% for forested areas that have already entered the timbering stage; encouraging foreign enterprises to invest in the forestry sector; felling trees must be replanted in time in order to protect the existing forestland; and vigorously promoting exports and introducing exotic species. In 1980, the government also promulgated regulations on the rational development and protection of natural forests, prohibiting the felling of trees in protected areas and requiring those who felled natural forests to replant the same area of planted forests in the same year, while promoting family tree-planting programs. The above measures have led to a significant development of forestry in Chile, especially by individuals and private enterprises, with forestry exports reaching 784 million U.S. dollars in 1989, and have also played a very important role in the restoration and protection of forestry resources and the protection of the ecological environment.
During the military government's rule, the fishery industry developed rapidly, and Chile became the first fishery country in South America and the fifth in the world in 1980, with fishery exports valued at nearly 1 billion U.S. dollars.
In 1979, the introduction of new machinery and equipment, advanced brewing technology and stainless-steel barrels from abroad increased production, and Chile became a leading country in the production of wine, which was recognized as the best in the international arena. Under the policy of increasing the export of non-traditional products, orchards and vineyards appeared in large numbers, and in 1979 a decree was issued to allow the sale of land, and the agro-processing industry was able to develop rapidly, and by the 1980s export agriculture had become the most dynamic and strongest sector of the Chilean economy. During the military government, the active development of national industry, the establishment of the Chilean National Copper Mining Company in April 1976, in the implementation of the privatization of state-owned enterprises to hold the country's control over the production of copper, Chile became the world's top copper-producing country in 1982, in the world's share of the copper market as high as 40% or more, and in the international copper mining industry occupies an important position.
The military government actively develop the petroleum industry, formulated a number of plans to strengthen the exploration and exploitation of national petroleum resources. 1976 began to implement a plan for exploration and exploitation of oil in the Strait of Magellan; in 1979 formulated a plan for the exploitation of offshore petroleum resources; in 1981, the National Petroleum Corporation began to implement a ten-year plan to accelerate the development of the petroleum industry through the use of foreign investment. To this end, in 1982, NOC signed a contract with the United States Diamond Exploration Company (DEC) for the completion of the "Pacific Plan" to search for oil on the continental shelf off the coasts of Valparaiso and Concepción. In 1982, it signed a contract with Diamond Exploration of the United States to complete the "Pacific Program" to search for oil on the continental shelf off the coast of Valparaiso and Concepción, and in 1982, it signed a contract with the American companies Atlantic Richfield Petroleum and Amerada Petroleum for the exploration of oil resources in the Strait of Chacao to Pelas. The military government's economic reforms were so strong and wide-ranging that it often lost sight of the other side of the coin in its implementation, and the economy had several ups and downs, plus in the early 1980s, Chile was plunged into a debt crisis, and the middle and lower classes paid a high price. Nevertheless, the reform laid the foundation for stable economic growth and more effective participation in international competition.