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Puerto Montt has gained renown and grown significantly due to the rise of Chile as the second largest salmon producer of the world during the s and s. However, the Chilean salmon aquaculture crisis of the late s resulted at least temporarily in severe unemployment and exposed weaknesses in the local economy.
Originally, the site was covered by thick forest and was called Melipulli which means "four hills" in Mapudungun. It was selected as an entrance to Lake Llanquihue when its proximity to the open sea was discovered. By December, after the forest was cut down, the area was burned to clear the land in anticipation of completing the settlement plan. It was named after Manuel Montt , President of Chile between and , who set in motion the German immigration. In the city was connected by train to Santiago, making it an important point of entry into Chilean Patagonia and augmenting its commercial development.
By it had a population of 27,, and the city was rapidly urbanizing. However, the Valdivia earthquake destroyed much of Puerto Montt, collapsing the port and the train station along with many building and houses. Eventually the city recovered, becoming once again an important urban centre as well as a port of national interest. At the start of March , approximately 90 landless persons received advice from Socialist member of parliament Luis Espinoza due to the local authority never granting them any land they needed to build homes.
On March 4, , they settled on farmland belonging to an absentee landlord. Having been denied titles by the local authorities, these families simply moved onto the empty, unoccupied land.
They did so seeking squatters' rights, and without making any payment of rent. However, a change of plans by the ministry of the interior quickly led to new orders. At midnight on March 9, Luis Espinoza was charged with breaking the law, arrested, and moved to the city of Valdivia. Eight of the landless persons were shot dead and two, a 9-month child and an adult, died afterwards. All of the newly built homes were burned to the ground. The massacre of Puerto Montt and the public outcry that followed were major factors contributing to the defeat of Eduardo Frei 's party in the Chilean presidential election of which was succeeded by Salvador Allende 's Unidad Popular.