Chile's a tough bird... and must remain so

The global economy is healthy but vulnerable to persistent volatility shocks.

That was among the main takeaways from a presentation given by Chilean economist and director of US higher education institution MIT's World Economic Laboratory, Ricardo Caballero.

The impact of these shocks is in the early phase of being transmitted from the financial markets to the real economy, Caballero said during the event, held in capital Santiago by local lender Banco Security.

Emerging markets such as Argentina, Turkey and South Africa have been negatively impacted by a web of interlinking factors including weaker investor risk appetite, trade-war fears and a strengthening dollar.

Caballero compared these nations to coal mine canaries, which were once used by miners in Britain to detect deadly carbon monoxide and other toxic gases underground. If the animal became ill or die, that alerted miners.

Where is the "gas" emanating from? Caballero cited fiscal expansion in the US and trade tensions as a result of President Donald Trump's tariffs.

Chile, while seen as relatively resilient overall, is exposed in terms of its relatively high-level of dollar-denominated debt, particularly in the corporate sector.

"Fortunately we aren't a canary; we're a tiuque [a Chilean bird of prey] which is more resilient," Caballero said. "The challenge is remaining one."

The country, whose economy had been gaining strength, has been hit recently by a drop in the price of key export copper amid trade tensions between the US and China. At a Moody's conference this week the country's reliance on revenue from the red metal – along with relatively low per-capita income – were identified as areas that need addressing.

The second speaker at the Banco Security conference was Chilean senator and economist Felipe Kast, who said Chile has tended to perform well in terms of economic policy and that the country has advanced - but that work remains in terms of social policy.

A central focus, he said, should be on child development and protection and leveling the playing field for all young people in Chile.

"We've built the perfect house, but for just a few," Kast said. "We've left outside the majority of our children."

Inequality has long been recognized as a problem in Chile.