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 worldwide by the Great Depression.

At the end of that month the Finance Minister, Pedro Blanquier, notified all public employees, including the members of the armed forces, of a reduction of 30% in their salaries.

This reduction was on top of a previous 10% cut that had been inflicted on the armed forces the year before and the loss of all extra bonuses already accrued and owed to them.

The military was 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 Chilean Navy, where a strict class system was in place, separating the officers from the enlisted men.

On the night of 31 August-1 September 1931, while the fleet was in the port of Coquimbo, the sailors of the Chilean battleship Almirante Latorre mutinied, taking prisoner all the officers of the ship, who were kept confined in their cabins.

In the meantime, other military units started to join the movement, including the Arica and Maipo Army Regiments, stationed in the cities of La Serena and Valparaíso, respectively.

At this point the demands of the mutineers were increased to include agrarian reform, industrial "solidarity" and the payment of external debt by the "millionaires".

At the beginning the negotiations moved quite smoothly, but they soon broke down when the mutineers started to suspect that the government was only interested in buying time while preparing to attack.