Chile: from the peso to the escudo and back

Chile changed its monetary unit twice in 15 years. It replaced the peso with the escudo in 1960. It left the escudo and returned to the peso name in 1975.

Both reforms converted 1,000 old units into one new unit.

1960: from the peso to the escudo

Accumulated inflation had increased the size of peso amounts. Chile introduced the escudo on January 1, 1960, to simplify the scale.

The relationship was:

1 escudo = 1,000 old pesos

The new unit was divided into 100 centésimos.

The name change clearly separated the new scale. A price of 10,000 pesos became 10 escudos.

The escudo did not stop inflation

The reform reduced the number of digits but did not remove inflation pressure. Prices rose again during the following years, and larger banknotes became necessary.

A more convenient unit is not the same as a more stable currency. Stability depends on later policies and economic conditions.

1975: return of the peso

A new unit called the peso entered use on September 29, 1975.

The relationship was:

1 peso = 1,000 escudos

It removed three more zeros.

The Banco Central de Chile documents the replacement as part of the monetary and economic reforms of the period.

Restoring the name did not make the new pesos identical to those used before 1960. They belonged to a new scale.

The cumulative equivalence

Combining both conversions gives:

1,000 × 1,000 = 1,000,000

Therefore:

1 peso from 1975 = 1,000,000 pesos from before 1960

The sequence removed six zeros in total.

This is a nominal equivalence. Old banknotes do not necessarily remain legal tender and cannot always be exchanged today by applying that calculation.

Why the old name returned

Currency names have historical and cultural meaning. Peso had been used for a long period in Chile and other Spanish-speaking countries in the Americas.

Restoring it kept a familiar name even though the unit was different.

For historical data, the name is not enough. The date and currency series must also be identified.

How it affects a historical series

A database can state pre-1975 values in escudos or convert them retroactively into pesos.

Either approach is valid when documented. The problem appears when they are mixed without notice.

For example, an exchange rate of 5,000 escudos per dollar just before the reform would equal 5 new pesos per dollar. A chart that shows 5,000 and 5 as consecutive unadjusted points would make the peso appear to appreciate by a factor of one thousand.

Only the unit changed.

Why the Chilean case is useful

Chile shows that redenominations do not all follow one pattern:

The first reform changed the name from peso to escudo.
The second restored the peso name.
Both used a 1,000-to-1 ratio.
The series introduced in 1975 is the basis of today's Chilean currency.

It also shows why a currency that needs hundreds of units to buy one dollar should not be judged only by nominal unit size.