Bolstering Chile in choppy seas

As internal and external headwinds buffet Chile, the country must take action on several fronts to support the economy and bolster the nation’s social fabric and institutions.

That was among the main takeaways from a conference held in capital Santiago hosted by two senior economists/academics.   

On the trade front, measures include further integrating the country into the global economy and ensuring regulations, particularly in the area of technology and data protection, keep pace with change.

Economist Rodrigo Fuentes, a professor at Pontificia Universidad Católica de Chile, highlighted the importance of deeper cooperation and trade links with other countries to weather the US-China trade spat and be better prepared for future tensions.

“This is key, very important,” Fuentes (pictured) told BNamericas. 

“Chile is a small country in the global economy … we’re mere spectators,” added Fuentes, who authored report Perfiles Económicos Asia-Pacifico 2019  – launched during the event – for Fundación Chilena del Pacífico, an organization tasked with supporting Chile’s economic insertion into the Pacific basin. 

Unrest in Chile has thrown the economy – already impacted by fallout from the US-China trade war – into a tailspin, with GDP in October shrinking 3.4% year-on-year. Chile is braced for further weak readings and a possible technical recession. 

In response, officials have announced measures including a US$5.5bn stimulus package targeted at public infrastructure reconstruction, pension payouts and SME lending. 

Chile is already among the world’s most open economies and the US-China trade spat has hurt the price of copper, the country's principal export.

China and the US are Chile’s two biggest trading partners.

Fuentes said: “How can we defend ourselves? With the deepening of economic cooperation agreements, to be able to absorb better technology, to be on a stronger competitive footing and to have alternative markets for when these things happen again.

“It’s happening now – and will, I believe, go on for longer than people may think. We therefore have to find new markets, have new partners and have access to new technology. Chile’s strategy must continue along the path of deepening not just commercial agreements … but also economic cooperation, sharing of knowledge, best practices. These things are fundamental. We should be looking at countries that, for example, demonstrate good practice in terms of economic policy … but also everything to do with technology.”

 

In terms of social policy, economist Klaus Schmidt-Hebbel, a professor at Chile's Universidad del Desarrollo, urged adoption of reforms that address citizens’ needs. Other measures outlined include reforming the police, intelligence services and courts, reaching anti-violence accords and prosecuting those responsible for the destruction – seen as premeditated – during the protests that have rocked the country.

“We need a far-reaching and effective social pact,” said Schmidt-Hebbel, who highlighted long-standing concerns among Chileans over crime, quality of public education, pensions and public health provision.

He said recent advances made between the government and most quarters of the opposition constituted positive signals. 

A consultant to Fundación Chilena del Pacífico, Schmidt-Hebbel also echoed Fuentes’ call for deeper integration into the global economy.

Read the Fundación Chilena del Pacífico report, titled Perfiles Económicos Asia-Pacifico 2019