The Pinochet regime's economic policies represented a drastic shift from the socialist-oriented policies of his predecessor, Salvador Allende. Under Pinochet, Chile adopted a neoliberal economic model, spearheaded by a group of economists known as the “Chicago Boys,” who had been educated at the University of Chicago under Milton Friedman. They implemented policies that included privatisation of state-owned enterprises, deregulation of the economy, reduction of trade barriers, and cuts to social spending. These measures were a stark contrast to the nationalisations and state-led development strategies of previous administrations. The neoliberal model aimed to stabilise the economy through free-market principles, which was a significant departure from the centrally planned economic approach of Allende’s government.

Chile's political developments from 1945 to 1981 mirrored several broader trends in Latin American politics. This period saw the rise of populist leaders, the influence of external powers in domestic affairs, military interventions, and the experimentation with both left-wing and right-wing economic and social policies. The Cold War context fuelled ideological conflicts and interventions by the United States, as seen in other Latin American countries. The pattern of democratically elected governments being overthrown by military coups was common throughout the region. Chile's transition from a democratic system to a military dictatorship under Pinochet and the subsequent neoliberal economic reforms also paralleled similar developments elsewhere in Latin America.

Chile’s economy played a critical role in the events leading up to the 1973 military coup. Under Allende’s presidency, his socialist policies, such as the nationalisation of key industries and land reform, were initially popular but eventually led to severe economic challenges, including hyperinflation, food shortages, and a decline in foreign investment due to the expropriation of foreign-owned companies. These economic difficulties exacerbated social unrest, leading to strikes and protests. The economic turmoil not only decreased Allende’s domestic support but also made the country more susceptible to external influences. The military justified their intervention as a necessary step to restore economic stability, which had deteriorated significantly by the time of the coup.

The United States' foreign policy during the Cold War had a profound influence on Chile, particularly through the implementation of the Truman Doctrine and the subsequent policy of containment. Fearful of a potential 'domino effect' of spreading communism in Latin America following the Cuban Revolution, the U.S. sought to ensure that pro-American governments remained in power or were established in the region. This policy translated into substantial CIA involvement in Chilean politics, including significant covert operations aimed at undermining Salvador Allende’s presidency, which was seen as a Marxist threat in America's backyard. U.S. economic sanctions and political pressures were significant factors that destabilised Allende's government, culminating in the support of the 1973 military coup that installed Pinochet, who was seen as a bulwark against communism.

Social unrest during Allende's government was fuelled by a combination of economic hardship, political polarisation, and ideological strife. Allende’s ambitious socialist reforms aimed to redistribute wealth and restructure the economy, which alarmed the middle and upper classes, as well as foreign investors. These groups felt their interests were threatened, leading to their opposition. Additionally, the rapid pace of Allende's reforms did not allow the economy to adjust, causing inflation, shortages of goods, and black market proliferation. Furthermore, the sharp ideological divide between Allende’s supporters and the opposition created a highly polarised society. Worker strikes and right-wing protests became frequent, significantly destabilising the country and contributing to the conditions that led to the military coup.