Chile doesn't have the diversity or quality of handicrafts (artesanía) that you will find in Peru or Bolivia, and the prices here are certainly considerably more expensive, especially in Santiago and the Central Valley. However, if you are a patient and savvy shopper and you know what you are looking for, you can certainly discover unique and beautiful traditional souvenir items in the craft markets (ferias artesenales), which are omnipresent throughout the country.
Look out for items made by the indigenous Aymara and Mapuche tribes; zampoñes (flutes), kultrunes (ceremonial drums), and palos de agua (rain sticks). In the altiplano region, especially around Arica, alpaca sweaters, ponchos, and scarves are the more readily available and eye-catching souvenirs (and most practical, given the high altitude chill), but they are of generally inferior quality to those across the border and therefore are most worthy of polite, but canny, bargaining. The best quality alpaca weavings are those produced by the Aymara people in Lauca National Park. In La Serena's crafts markets, the leather items are quite striking; you can find everything from saddles and stirrups to belts and boots -- if you want to look the part, you can even pick up some idiosyncratic huaso (cowboy) items such as a straw hat or poncho.
Jewelry, ranging from copper bangles to stunning lapis lazuli and Mapuche silverware, is Chile's prize purchase. The semiprecious, indigo-blue lapis lazuli stone is found only in Chile and Afghanistan and is normally set in silver to form dazzling pendants, chokers, rings, earrings, and bracelets. While it is generally less expensive than in the U.S. and Europe, it is still a rather pricey investment -- a pair of simple lapis lazuli stud earrings costs around $40/£27. It is always best to buy lapis lazuli from a reputable jewelry store (one exception being the excellent Pueblito de los Dominicos market, just west of Los Condes), and always look for the deepest color stones, which are considered to be of superior quality. In Santiago, the area surrounding Patio Bellavista offers high quality stones and a variety of styles ranging from the simple to the ostentatious.
The Lake District is the best place to purchase Mapuche silver ware. Still worn by indigenous women, these striking silver designs and extravagant headdresses were originally designed to be a show of wealth; the artful fusion of the practical and the decorous in these pieces is both distinctive and dramatic.
Chilean wine is considered to be among the finest and best value of the New World wines. Don't get too carried away however; there are strict Customs limitations on how much you can take home. If you plan to tour the pisco distilleries of La Serena and Pisco Elquí, you can learn about the nuances of the local pisco grapes and make informed decisions on the best bottle to take home for a cocktail-hour pisco sour.
Note: This information was accurate when it was published, but can change without notice. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.