New administration reverses expropriation of property founded by ex-Nazi Paul Schäfer, leaving victims in limbo

With its Germanic crosses and colourful toy-town facades, the village square of the tiny Chilean settlement of Villa Baviera gives little indication of the horrors of its past.

Until 1991, this cattle town of a few hundred people was a compound known as Colonia Dignidad. Its leader, Paul Schäfer, a former Nazi and weapons smuggler, bought a swathe of land in the valley in 1961, eventually holding as many as 300 people in a fenced enclave with minimal contact with the outside world. He sexually abused and even tortured the children in the camp.

During the dictatorship of Gen Augusto Pinochet, Colonia Dignidad was used as a clandestine torture centre where at least 100 people are thought to have been murdered by state security forces.

Schäfer was eventually sentenced after a conviction on child abuse charges to 20 years in prison, where he died in 2010.