History of the Chilean Peso and its Paper Currency

Posted on 8/18/2020

Chilean banknotes display a long road of perseverance and history.

The Chilean War of Independence began in 1810 and ended in 1826. Chile was able to win its independence and, in doing so, established its own currency. In 1817, Chile created the Chilean peso to be used throughout its country.

The Chilean peso was at first only produced in coins, but shortly after the peso’s issuance, paper currency was issued out of necessity when gold and silver were scarce. Even still, Chilean paper money was issued very rarely in the first part of the 19th century. Chilean paper currency would become prominent in Chile only after the country allowed for private banking.

In 1860, Chile passed the general banking law allowing for private banks to issue currency. The banks had few restrictions and were not required to maintain a reserve of gold or silver against their note issuances. In the beginning of private banknote issues, banks converted notes on demand for gold and silver, but poor management eventually led to banks not being able to convert their notes back into precious metals.

In 1878, a run on the banks forced Chile to pass an inconvertibility act. The act made private banknote issues inconvertible to gold or silver, preventing the private banks from going bankrupt. The inconvertibility of the issued banknotes was supposed to last only a year, but inconvertibility of the private banknotes lasted much longer.

Chile, Banco Agricola, Pick# S106, 1887, 1 Peso, front
Graded PMG 25 Very Fine EPQ
Click image to enlarge.

Soon after the passage of the inconvertibility act, the state became the major supplier of paper currency for the country. Inflation and wars maintained the government’s stance on banknotes being inconvertible to gold or silver until 1895.

For a brief time from 1895 to 1898, Chile allowed for notes to be converted to precious metals in hopes of curbing its inflation and to possibly maintain its current banking system. During this time, Chile allowed the banks to deposit gold at the Mint of Chile. This was done in hopes that the banks could have a 1-for-1 backing of gold for their issued notes and to re-establish convertibility.

The banks were unable to achieve this and, in 1898, Chile prevented banks from issuing any more notes. The remaining circulating notes were then all converted to fiscal notes with an overprint. After 1898, Chile became the sole issuer of banknotes for the country for good, but economic conditions were still turbulent.

Chile, Banco de Matte, Mac-Clurie y Ca., Pick# 41, 1898, 1 Peso, front
Graded PMG 30 Very Fine
Click image to enlarge.

Chile, Banco de Matte, Mac-Clurie y Ca., Pick# 41, 1898, 1 Peso, back
Graded PMG 30 Very Fine
Click image to enlarge.

Eventually in 1925, the Central Bank of Chile was established. The Central Bank provided more stability to Chile’s economy, but inflation continued. In 1960, to help curb inflation, the Chilean Peso was replaced by the Escudo at a rate of 1 Escudo for 1,000 Pesos. The Escudo was short-lived with a new Chilean Peso being issued in 1975, at a conversion of 1 Peso for 1,000 Escudos. After this final transition to the Chilean peso, Chile has had a relatively stable currency with credit being given to the Central Bank becoming autonomous from the country.

The banknotes from Chile display a long road of perseverance and history. PMG has graded just over 1,000 notes from the country, making any of these notes a great addition to any collection. Check out the PMG Registry to see what sets you can start for Chile.


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