The peso is the official currency of Chile. It has circulated in two incarnations since 1817. This decimal currency can be subdivided into 100 centavos. However, denominations under one peso are no longer circulated. All currency in Chile is regulated by the Central Bank of Chile, an autonomous institution created under the Chilean constitution that is the sole authority in all of the country’s monetary matters.
The first Chilean peso was introduced in 1817 with a value on par with the Spanish 8-real. Until 1835, the peso was divisible into eighths, and a higher currency worth 2 pesos called the escudo was common. In 1835, centavos were introduced but reales and escudos continued to be used until 1851. In that same year, the Chilean peso was put on the silver standard and valued at 1 peso: 5 French francs, which equalled 22.5 grams of pure silver. Chile also circulated gold coins in the late 19th century, but they were on a parallel gold standard whereby 1 peso equalled 1.37 grams of gold. By contrast, 5 French francs were valued at 1.45 grams gold. This dual-metal standard was abandoned in 1885 in favour of a peg to the British pound sterling, which was on the gold standard at the time.
The Central Bank of Chile was established in 1925 with the goal of bringing the economy of Chile into the modern economic world. The mind behind the establishment of the bank was that of Edwin Kemmerer, a professor of economics at Princeton University. In addition to creating the bank, Kemmerer also helped write and pass modern monetary, banking and budgeting legislation for Chile. The Central Bank began with only 150 million pesos in capital. In 1960, Chile’s Foreign Exchange Commission merged into the Central Bank, expanding the bank’s power and duties. In the same year, the peso was replaced as the official currency of Chile, with the new currency, the escudo, valued at 1000 pesos.
The escudo remained Chile’s national currency for 15 years, but rapid devaluation called for the introduction of a new currency. The new Chilean peso was introduced in 1975 at a value of 1 new peso: 1000 escudos. The value of the Chilean peso was in a slow but steady decline from 1975 to 1994. It then stabilized for three years before continuing to devalue. In 2002, the value of the Chilean peso began a steady increase in value.