The government of Chile had applied for permission to purchase F-5s as far back as 1967, but had always been refused. Undaunted, the Popular Unity government of President Salvador Allende that was elected in 1970 attempted to order a batch of F-5Es and Fs shortly after it entered office. The MiG-21 was at that time being pressed on Chile by the Soviet Union, but the F-5E was favored by the Fuerza Aerea de Chile (FAC, the Chilean air force).
The request was again refused because of the deteriorating relations between the US and the Allende regime. The government of Chile had moved quickly to socialize the economy, taking over the copper mines, foreign-owned firms, oligopolistic industries, and banks. In addition, the government seized virtually all of the great estates, turning over the lands to the resident workers. It turned many factories over to management by the workers and the state. In its foreign policy, Chile had opened diplomatic relations with Cuba, China, the Democratic People's Republic of Korea (North Korea), the Democratic Republic of Vietnam (North Vietnam), and Albania. It had befriended the Soviet Union, which sent aid to the Allende administration.
All of these moves had the effect of irritating Washington. The government of President Richard M. Nixon retaliated by squeezing the Chilean economy by terminating financial assistance and by blocking loans from multilateral organizations, although it did increase aid to the military, a sector which was increasingly unenthusiastic toward the Allende government. It was widely reported that at least at the covert level the United States was actively working to destabilize Allende's Chile by funding opposition political groups and media and by encouraging a military coup d'état.
A military junta under the direction General Augusto Pinochet violently seized power in Chile in September of 1973. Shortly thereafter, the FAC negotiated the supply of 15 F-5Es and three F-5Fs from the USA. This time the request was honored because of the friendly relations that now existed between the newly-installed anti-Communist Pinochet regime and the Nixon administration in Washington. Aid and loans from the United States increased spectacularly during the first three years of the regime, while presidents Nixon and Gerald R. Ford were in office.
The FAC received its first Tiger IIs in 1976. These aircraft were issued to Grupo No. 7 of Ala 1, based at Antofagasta-Cerro Moreno. These aircraft (like many export Tiger IIs) had a dorsal fin fillet for enhanced maneuverability, plus a prominent VHF blade antenna on the spine. The F-5Es were assigned air defense duties covering the northern half of Chile, whereas the Arenas-based Mirage 50Cs retained responsibility for the southern half.
The deliveries of the F-5s to the FAC had fortuitously taken place just before the onset of yet another arms embargo, this time imposed by President Jimmy Carter because of the poor human rights record of the Pinochet military dictatorship. Following the coup, military commanders had closed Congress, censored the media, purged the universities, burned books, outlawed Marxist-oriented political parties, and banned union activities. The worst human rights abuses occurred in the first four years of the junta, when thousands of civilians were murdered, jailed, tortured, brutalized, or exiled, especially those linked with the Popular Unity parties. The secret police, reporting to Pinochet through the National Intelligence Directorate (Dirección Nacional de Inteligencia--DINA), replaced in 1977 by the National Information Center (Centro Nacional de Información--CNI), kept dissidents living in fear of arrest, torture, murder, or "disappearance." The Carter arms embargo made it difficult for Chile to acquire spares for its F-5s, and only four of its F-5s were still flying by the mid-1980s.
Since most of the FAC F-5s were grounded anyway, Chile offered its fleet of F-5s for sale when Brazil went shopping for arms. In the meantime, relations between Israel and Chile had warmed to the extent that Israel had begun to supply an increasing amount of technical assistance to Chile, equipping the surviving F-5s with Shafrir missiles and helping in local modifications to the early-model AIM-9B Sidewinder missiles that had been previously supplied by the USA. In 1988, a deal was struck with Israel Aircraft Industries (IAI) in which Chile would acquire 12 Kfir fighter-bombers and the F-5s would be disposed of through third parties. However, this proposal was abandoned when it became clear that the local manufacturer ENAER would now able to maintain the FAC's F-5s.
Once the Pinochet regime left office and a more democratic government returned to Chile, relations with the US gradually improved. In the late 1980s, the F-5 became the FAC's aggressor aircraft for the FAC. As a sign of improving relations with the USA, FAC aggressor F-5s flew exercises against US Navy aircraft from the USS Independence.
In 1990, a contract was signed between the FAC and IAI to upgrade 12 F-5Es and two F-5Fs. This upgrade program added an Elta EL/M-2032B multimode pulse-Doppler radar and a revised armament fit of Rafael Shafrir or Python III AAMs. The fitting of the new radar required that the port M39 cannon be deleted. The upgraded F-5s have also received an El-Op HUD/WAC, HOTAS controls, INS/GPS, a new Astronautics (Israel) modular mission and display processor, video camera system and two Elbit cockpit MFDS (monochrome) coupled with a MIL-STD 1553B data bus. The aircraft had a fully-integrated electronic warfare suite with RWR, ECM jammer and chaff/flare dispensers. The first two aircraft (serial numbers 805 and 809) were upgraded by IAI in Israel, but the remainder were to be upgraded by ENAER in Chile. The upgrade program was dubbed *Tiger III* by IAI. The first F-5E Plus Tiger III was produced in Israel in July of 1992, whereas the first ENAER upgrade was delivered in 1994. This upgrade program is still going on.
There was a report in 1995 that Honduras had transferred its F-5s to the FAC, with the blessing of Washington. There was even a report that these planes had entered service with the FAC's Grupo 7 to cover the shortage as Chile's own F-5s undergo their upgrades. However, these reports appear to be in error, since the Honduran F-5s are still at their base at La Ceiba.
A total of 10 F-5s remained operational in Chile as of 2009. In March of 2013, the Uruguayan Air Force initialted talks for the procurement of 12 surplus F-5s from Chile.