Chile Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Chile is a country on the western coast of South America with a distinctive geography and rich natural resources. After decades of import substitution industrialization policies, the country has been pursing an export-led growth strategy since the late 1970s. Its economy is integrated with the rest of the world as a result of high levels of openness in trade and finance. Following a dictatorship that remained in power between 1973 and 1990, Chile has been democratic and politically stable under center-left coalition governments. The center-left coalition, in power since the end of the dictatorship, has followed the market oriented economic policies of the previous period with an emphasis on lowering income inequality and fighting poverty. Chile has enjoyed one of the strongest economic growth performances in Latin America over the last three decades. The country is the leading producer of copper and nitrates. While its exports are still dominated by copper, Chilean exports have diversified into nontraditional exports such as wine and salmon. Its economy is stable with low levels of public debt and inflation, and a relatively low level of unemployment. Since 2003 the economy has experienced strong economic growth that is partly driven by the extremely favorable copper prices.

Between 1970 and 1973, after a long history of democracy, Chile succumbed to political polarization and economic crisis under the socialist government of Salvador Allende. The military, under the leadership of Augusto Pinochet, intervened in 1973 and established one of the most repressive regimes in Latin America, which lasted until 1990. The military regime implemented radical reforms, transforming Chile into a market-based and capitalist society. Between 1973 and 1990, Chile became highly integrated with the rest of the world; foreign trade’s contribution to gross domestic product (GDP) increased substantially. The expansion and diversification of exports, which began in the late 1970s and strengthened in the 1980s, became the engine of growth. The share of exports in GDP reached 33 percent in 1990, while the share of copper in total exports decreased to 45.5 percent (it was 75.5 percent in 1974).

The center-left coalition (La Concertación de Partidos por la Democracia) that took power in 1990 opted for consensus-building in politics, continuing market-friendly policies, and supporting export-led growth. It also aimed to address the massive poverty and income inequality inherited from the previous regime. As a result of further export diversification and remarkable success in agricultural, fishery, and wood products, Chile grew at impressive rates in the 1990s (the average GDP growth rate was above 8 percent between 1991 and 1997). However, despite gains against poverty since 1990, Chile still has a highly skewed income distribution.

During this period, Chilean trade with the European Union and Asian countries such as Japan and South Korea increased considerably. Chilean entrepreneurs were successful in filling particular niches in advanced industrialized countries (e.g., the supply of high-quality fishery products into Asian markets).

Chile supported its export industries by enacting trade agreements (preferential and free) with various countries. Currently, Chile has bilateral trade agreements with more than 50 countries, including free trade agreements (FTAs) with the European Union, the United States, China, South Korea, and Japan. Chile is also an associate member of Mercosur.

Following the Asian financial crisis, the Chilean economy slowed down between 1998 and 2002. Economic growth resumed between 2003 and 2007. At the end of 2007, the Chilean GDP was $164 billion and GDP per capita was close to $10,000. Chilean businesses benefit from low levels of taxation compared to other countries in Latin America. Investment has been strong and Chile continues to attract foreign direct investment (especially in mining). The finance sector in Chile is efficient and profitable. Chilean retail chains (e.g., Falabella, Ripley, Ahumada) are major investors in other Latin American countries. Despite these achievements and continuing success of export industries, the stock of human capital is low in Chile, the educational system is plagued by quality problems, and labor force participation is not at desirable levels.

Bibliography:

Central Bank of Chile, Social and Economic Indicators, 1980–2000 (2002);
Simon Collier and William F. Sater, A History of Chile, 1808–2002 (Cambridge University Press, 2004);
Economist Intelligence Unit, Chile Country Profile, 2008 (2008);
Ricardo Ffrench-Davis, Economic Reforms in Chile: From Dictatorship to Democracy (University of Michigan Press, 2002);
Felipe B. Larraín and Rodrigo M. Vergara, eds., La transformación económica de Chile (Centro de Estudios Públicos, 2000);
Javier Martínez and Alvaro Díaz, Chile: The Great Transformation (Brookings Institution, 1996);
OECD, Economic Survey of Chile (2007);
Lois Hecht Oppenheim, Politics in Chile: Socialism, Authoritarianism, and Market Democracy (Westview Press, 2007).

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