Germany is to declassify documents on a secretive colony – run by a Nazi paedophile in Chile – that was used as a torture site by dictator Augusto Pinochet. Announcing the move, foreign minister Frank-Walter Steinmeier expressed regret at German diplomats' failure to take action and stop abuses at Colonia Dignidad, or 'Dignity Colony'.

The German enclave was founded in 1961 by Paul Schafer, a former Nazi soldier and convicted paedophile who fled for South America after the end of World War II. Schafer turned the commune into a sect where daily physical and mental abuse took place. The German immigrants that populated it were virtually enslaved.

Bound to vow of secrecy they were lived in an oppressive environment, subjected to draconian punishments and often raped. Pinochet's secret police would also use the site, located in a in a remote area at the foot of the Andes some 350km south of Santiago, to torture prisoners and dissidents.

Steinmeier said German diplomats should have done more to protect the victims, describing their handling of the Colonia Dignidad case as "no glorious chapter" in Germany's diplomatic history.

"For many years, from the 1960s to the 1980s, German diplomats looked the other way, and did too little to protect their citizens in this commune,' he said. "Even later, when Colonia Dignidad was dissolved and the people were no longer subjected to the daily torture, the service lacked the determination and transparency to identify its responsibilities and to draw lessons from it."

According to estimates, thousands of boys were sexually abused over 30 years before a series lawsuits were finally brought against Schafer in 1997. He fled to Argentina and was arrested in 2005.

He was subsequently sentenced to 33 years in prison on charges of sexual abuse of children. He died in jail in 2010.

Speaking at a screening of a movie on the colony starring Emma Watson and Daniel Bruehl, Steinmeier said he ordered files related to Colonia Dignidad from 1986 and 1996 be unclassified 10 years ahead of due date for the sake of transparency and research.

Former residents have filed two separate lawsuits, one against Chile and one against Germany, seeking reparations. Colonia Dignidad continues to exist, but the community has changed its name to Villa Baviera.