Even Chile's own government ministers have called Colonia Dignidad "a state within a state." [7].

Near the border with Argentina, Colonia Dignidad has been called 'a country within a country'.

Colonia Dignidad spans some 32,000 acres in the Andean foothills just east of Parral, Chile, about 200 miles south of the capital of Santiago [8]. It is has immense wealth from mysterious sources, regularly receiving funds sent from Germany and the US [9].

Colony officials say about 300 people live there, although birth and death records are kept secret. According to eyewitnesses and press reports, Colonia Dignidad maintains its own airfield, and a powerful radio communications system which can reach most of the world. There is a 65-bed hospital, a wheat mill, bakery, meat processing factory, and dairy. The settlement also has a power plant, a fleet of heavy trucks, a mechanics shop, facilities for making bricks and slate tiles and even a mine of some kind. It also has its own cemetary, where human rights activists claim an unknown number of political prisoners are buried [10].

La Colonia operates the boarding school where Schaefer is accused of having raped the boys, an orphanage, and it provides free medical attention to its impoverished neighbors. (However, locals have been quoted as saying the colony's free medical services were "a last resort" because they do not trust the German doctors, especially one nurse with a particularly sadistic bent.) [11]. Through such projects, Colonia Dignidad has been able to support its claim of being a charitable organization [12].

At the colony, family life takes a back seat to work. "Work should be the purpose of human life, and one should not feel that one must rest after eight hours of work," Harmut Hopp, a colony doctor and spokeman, has said. "There is a malformation in modern man that makes him think he is obligated to rest and have fun after eight hours of work." And indeed, residents work long hours without pay [13].

Only German (and a little English) are spoken at Colonia Dignidad. Television, radios and newspapers are banned. Women are not permitted to wear pants or short skirts, and most clothing is styled after that worn in 1940s Germany. According to former members, children are separated from their parents and taught to address them as aunt and uncle. They are kept in single-sex dorms until they are married, which is not allowed until age 21. Sexual relations are tightly regimented, and even as adults men and women are kept segregated [14].

La Colonia calls itself a "religious community" but its beliefs and practices are it's most mysterious aspect of all. It has no apparent clergy beyond Herr Schaefer, who does not dress or comport himself clerically. (He calls himself a psychiatrist.) The sect has been described as a Baptist splinter group. However soldiers interviewed by author Peter Levenda insist the group practices "strange rites in the forests." [15].

"They have their own religion," said one. "They celebrate festivals that are not on the Christian calendar." The soldiers also described nightime rituals involving "candlelit processions and chanting" and sometimes "great bonfires" [16].

Levenda, a life-long scholar of occult history, postulates the sect practices a form of Teutonic paganism, observing the traditional sabbats of Apr. 30, Aug. 1, Oct. 31, and Jan. 31 [17]. This is the same volk magic of the Nazi elite, including the SS which at the upper levels was literally a secret magickal society [18].