20 Centavos – Chile

In 1879, Chile operated under a bimetallic monetary system, officially pegging its currency, the peso, to both gold and silver at a fixed ratio. However, this system was under severe strain due to the global phenomenon known as the "silver crisis." The discovery of massive silver deposits in the United States and elsewhere in the 1870s had caused the international market value of silver to plummet, making Chile's official fixed exchange rate increasingly unrealistic. This created a significant arbitrage opportunity, where silver coins minted in Chile were worth more as bullion abroad than their face value domestically, leading to their rapid export and disappearance from circulation.

This currency drain coincided with the outbreak of the War of the Pacific in April 1879, which placed enormous and immediate fiscal demands on the Chilean state to fund its military campaign against Peru and Bolivia. The government, led by President Aníbal Pinto, faced a critical shortage of metallic currency to pay troops and suppliers. In response, it took the drastic step of authorizing the issuance of inconvertible paper money (fiat currency) in July 1879. These notes, issued first by the Treasury and later by private banks with government backing, were not redeemable for gold or silver, marking a decisive break from the bimetallic standard.

Consequently, by the end of 1879, Chile found itself in a transitional and precarious monetary state. The nation had effectively abandoned bimetallism in practice, operating on a forced paper currency to finance the war. This initiated a period of currency instability, where the value of the paper peso began to depreciate against the gold peso, leading to a dual-currency system and laying the groundwork for the inflation and economic debates that would characterize the postwar period.