SANTIAGO -- In the 14 years since President Salvador Allende was killed in a bloody coup, Chile's military government has remade the country's economy, sharply reducing the state's role and unleashing the private sector.

President Augusto Pinochet, following an economic program devised by aides who studied at the University of Chicago, has slashed tariffs, welcomed foreign investment, floated domestic interest rates and foreign exchange rates, sold off hundreds of state companies and privatized the social security system.

The military regime hopes to have these policies so entrenched that a civilian government would make only modest changes if the Chilean people vote to return to democracy in a national plebiscite expected to be held a year from now.

In the meantime, Pinochet is trumpeting the success of his free-market policies, with the economy having grown by 5.7 percent in 1986 and economists projecting a similar gain this year.

Critics of the government point out, however, that the economy has not quite recouped the losses suffered in the 1981-83 recession and that the poor are worse off than before.

With the economy again on the upswing and the free enterprise program solidly in place, Pinochet's management of the economy has won rave reviews from foreign businessmen and bankers, who rarely have anything positive to say about government economic policies in Latin America.

"Chile is one of the more open economies in the world," said the head of a U.S. company here. "It would be pretty hard for me to find fault with the way the economy is being managed."

When Pinochet took power on Sept. 11, 1973, he was determined to end the economic chaos enveloping Chile, although he had no specific plan to do this. Inflation was nearing 1,000 percent, strikes were paralyzing transportation and production, and people had to wait in long lines to buy such staples as bread and meat.

Pinochet soon settled on a plan developed by the so-called "Chicago boys" that called for removing the controls Allende had put on the economy and letting free enterprise flourish.

Fourteen years and two recessions later, Pinochet's program has taken root firmly enough that opposition leaders say they would only partially roll back his policies if and when Chile returns to democracy.

At the time of the coup, state-run companies and the public sector accounted for 39 percent of Chile's gross domestic product. They now account for about 20 percent.

The most far-reaching change the 71-year-old army general has promoted has been the privatization of the more than 800 companies Allende nationalized from 1970 to 1973.

Like Britain's Margaret Thatcher, Pinochet has also sold off many companies that the government had owned for decades. The Chilean government has sold or is in the process of selling all or part of the state steel company, the state airline, the national railroad, the state development bank and the government coal company.

In July, the government announced that it would offer 30 percent of Endesa, the national electric company, to private investors. And Education Minister Juan Antonio Guzman last week revealed plans to privatize the University of Chile's engineering school, hospital and television station.

Under the privatization scheme, the government sells the shares of state companies and institutes to local and foreign firms, the nationalized company's employes and to individual investors on the country's burgeoning stock market.

More than 50,000 workers, or 1.3 percent of the work force, have bought shares in privatized companies through the "popular capitalism" policy. Another 2.6 million employes belong to the privatized social security system.

"Any future government that starts playing with the profits of companies, either through price controls, negative interest rates or something else, will have an immediate impact on the pension funds," said Geert Geisterfer, a Citibank vice president here. "And when you play with people's pensions, you get them upset."

One of the few companies the military regime will not peddle is Codelco, the state copper mining company. Copper, however, is less important to Chile's economy today than it was during the Allende years.

Pinochet's free-market policies have unleashed an agricultural export boom that has reduced copper's share of exports from 80 percent to 41 percent.

Chilean farmers are now exporting pears, apples, kiwi, grapes and melons to the United States and Europe. Grape farmers have been so successful that U.S. growers are considering asking the Reagan administration to limit grape imports from Chile.

Reagan officials are not expected to intervene, however, since they enthusiastically back the Pinochet government's market-based policies. By contrast, U.S. policy helped destabilize Allende's government.

The Reagan administration has abstained in the past year on loans to Chile in both the Inter-American Development Bank and the World Bank to protest massive human rights violations.

But as Assistant Secretary of State Elliott Abrams said in testifying before a House subcommittee in July, "If our decisions in the international financial institutions were made on economic grounds alone, {their} loans to Chile would generally deserve our strong support and affirmative votes."

Reagan administration officials -- and foreign bankers -- also applaud Chile's prompt renegotiation of its foreign debt. While Brazil has declared a debt moratorium and Argentina and Venezuela are constantly pressing for new terms, Chile reached agreement to reschedule its commercial bank debt earlier this year without much fuss.

As a reward, bankers agreed to allow Chile in 1988 to pay interest once a year rather than twice, saving about $450 million. On a visit here a month ago, Citicorp Chairman John Reed said banks may soon resume normal lending to Chile.

The country's foreign debt is $19 billion, which is the highest per-capita in Latin America. This has saddled Chile with debt payments of $2.2 billion this year, which will wipe out the country's projected $1.1 billion trade surplus. Loans from multilateral institutions will cover most of the $1.1 billion current accounts deficit.

Chile has taken the lead among Latin American debtor nations in reducing its debt through so-called debt-equity swaps. Under this mechanism, both foreign and local companies buy debt of private and public sector firms from creditor banks at about a 30 percent discount.

Chile has had $1.4 billion of debt converted into capital since it began allowing debt-equity swaps in 1985.

Making over Chile's economy has not been painless. During the 1981-83 recession, one-third of the country's industrial companies had to be bailed out by their creditor banks. Many banks and financial institutions went bankrupt and the central bank had to prop up dozens of others.

While the industrial and banking sectors seem to have recovered, millions of poor people are worse off. Unemployment in the shanty towns that ring Santiago has risen and consumption of basic foodstuffs has fallen.

"People aren't starving, but they're in really bad shape," said a priest who lives in a Santiago slum.