To understand the setting of The House of the Spirits, it helps to think about the novel on two levels – a micro level and a macro level. On the micro level, it's the story of a wealthy family who spends most of their time divided between a big colonial-style mansion in the capital and an estate (called a hacienda in Spanish) in the countryside. The two settings help illustrate the themes of women and femininity and men and masculinity, which are kind of a big deal in this book. The city house becomes Clara's territory, and she slowly transforms the straightforward colonial rooms into a charmingly chaotic labyrinth of twisting hallways and staircases that lead nowhere. The country estate, on the other hand, is the province of the patriarch, Esteban Trueba, who furnishes the house in heavy, no-nonsense furniture and rules his hacienda with an iron fist. (For more on the significance of houses in the novel, check out "Symbolism, Imagery, Allegory.")
On the macro level, the setting is pretty broad – we're talking about a family saga of epic proportions that touches on questions of national identity and spans more than fifty years. While Allende never comes out and says it, there are several clues that let us know she's writing about Chile. From the magnitude of the earthquake described in Chapter 5, we can guess she's referring to the 1939 Chilean earthquake that devastated the country and killed nearly 30,000 people. And Chapter 13 tells the story of the military coup d'état that General Augusto Pinochet led against Socialist President Salvador Allende, establishing a totalitarian state that would last for fifteen years. (The fact that the deposed president and the author share the same last name isn't a coincidence – Isabel is the daughter of Salvador's cousin.) References to world events such as World War I and the moon landing place the action between the 1910s and 1973, the year of the military uprising.
Since the historical context of this novel is so important to the action of the story, it's interesting that Isabel Allende chooses to never mention the physical setting by name. Instead of naming historical figures whose identities just scream Chile, like Salvador Allende, Augusto Pinochet, and Pablo Neruda, she chooses to refer to them by title, calling them the Candidate (later the President), the dictator, and the Poet. (Just to give you a comparison, that's like us telling a story about the U.S. while referring to George Washington and Elvis as "the Founding Father" and "the King." You'd know we were talking about American icons, but we wouldn't actually have to come out and say they were American.) So why the intentional vagueness when it comes to the setting? Well, maybe it has to do with the idea repeated by several characters that state violence "can't happen here." Maybe Allende's point is that violence and injustice can happen anywhere, if we're not careful.