Background
In 1931, Chile was bankrupt. The situation had caused the downfall of President Carlos Ibáñez del Campo on July 26, 1931. The collapse of exports and prices for Chilean products, the lack of liquidity and the high level of external debt had led the League of Nations to name Chile as the country most affected world-wide by the Great Depression. There were already 130,000 unemployed and the situation had caused the closing of the saltpeter mines in the Atacama, in turn causing a massive migration of workers to the urban centers.
As part of its attempts to deal with the Great Depression, the government of Vice President Manuel Trucco, who had taken over from president Juan Esteban Montero on August 20, 1931, launched cuts to public spending. At the end of that month, the Finance Minister, Pedro Blanquier, notified all public employees, including the armed forces, of a reduction of 30% in their salaries. This reduction was on top of another 10% that had been applied to the armed forces the year before and the loss of all extra bonuses already accrued and owed to them. The military were already suffering from chronic low salaries and these reductions were further aggravated by the loss of purchasing power that the Chilean currency had experienced due to inflation and the general recession of the economy. The discontent was specially strong in the Navy, where a strict class system was in place, separating the officers from the enlisted men.
Read more about this topic: Chilean Naval Mutiny Of 1931
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