The following map shows at what depths earthquakes will occur in South America. The closer to the surface they occur, the more intense the seismic waves will be.

( Source : http://neic.usgs.gov/ )
By comparing the above map with the below map you can see where Valdivia is located, near the coastline in the southwest.

( Source : http://www.gate1travel.com/south-america-travel/maps/MapSouthAmerica.gif )
After you've compared the two maps you should have found that most of the earthquakes occur only 70km or less under the surface near Valdivia. *Note: the seismic waves that Valdivia and many other cities along the Chilean coast experienced on May 22nd 1960 were so great because the earthquake only occurred 60 meters under the Earth's surface.
Mitigation/Prevention of Loss
To prevent loss of life and money; state & local governmets and academic associations must provide residents with knowledge of how hazardous their region is and what the effects can be. Authorities should then provide information on how to deal with such occurances. The following are some suggestions on what to do during and after you experience an earthquake.
During an Earthquake...
1) If you are indoors, duck or drop down to the floor. Take cover under a sturdy desk, table or other furniture. Hold on to it and be prepared to move with it. Hold the position until the ground stops shaking and it is safe to move. Stay clear of windows, fireplaces, woodstoves, and heavy furniture or appliances that may fall over. Stay inside to avoid being injured by falling glass or building parts. If you are in a crowded area, take cover where you are. Stay calm and encourage others to do likewise.
2) If you are outside, get into the open, away from buildings and power lines and sit down on the ground
After the earthquake you can almost always expect a Tsunami Hazard.
3) If you live along the coast, be alert for news of tsunami warnings issued by the Local Warning Center. If you experience a strong earthquake and live close to the coastline, there may not be time to issue a warning. Move to higher ground as soon as you are able, and stay there until the authorities issue an "all clear."
4) If you are in a mountainous area, or near unstable slopes or cliffs, be alert for falling rock and other debris that could be loosened by the earthquake.
Steps were taken from a USGS approved, University publication found at: University of Alaska Fairbanks, 2004, Earthquake Do's and Don't's: http://www.uaf.edu/seagrant/earthquake/prepare2.html , Date Accesed: May 3rd 2005.
When we build homes in hazardous areas it is important to to keep in mind that there is little point in using disaster-resistant materials if they are not properly connected. Poor quality control and poor workmanship are problems that can be caught and corrected through construction inspections, which also help to ensure the high-quality construction. To build a homes/buildings that can survive an earthquake, avoid using heavy roofs or disproportionate height ratios that make the building top-heavy, and large asymmetrical plan areas that subject houses/buildings to excessive twisting or "soft-story" problems. Simple, symmetrical plans have both architectural and structural balance, and are less likely to break from twisting under earthquake stresses. Remember that if we spend more money and time on construction we reduce the chances of the building collapsing during an earthquake. Thus insurance companies and U.S. tax payers won't have to spend more money in the future on building again and again, these hazards are an on going process and they will show no mercy.
Achitectural information and advice were approved by FEMA's National Earthquake Hazards Reduction Program (NEHRP), and put together by: Farnsworth, C.B., Building for Disaster Mitigation, Home Energy Magazine Online January/February 2000: http://hem.dis.anl.gov/eehem/00/000113.html , Date Accessed: May 3, 2005