The setting of this novel is an unnamed South American country. Since the author is from Chile, we can infer that the author wants us to think of Chile.
See the eNotes article on the historical context of this novel for more information.
House of Spirits take place in South America around the 20th century -- based on the social & political issues in Chile.
Around the pages from 40 and up, there's a mention of a city called Lima. Lima is in peru. So I think its in peru, because there is a city in peru if am not mistaken the capital, Lima.
the novel takes place in chile around the 1970's or so and it goes into when wwII starts
i lost the page number. It's says the city in the beginning, around page 40`ish