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Dr. Jorge W. Suazo Georgia Southern University Department of Foreign Languages Paper presented at: Americas Council First Annual Conference May 24, 1997 Savannah, Georgia

The Institute for Management Development (IMD), based in Switzerland, conducted an Executive Opinion Survey for The World Competitiveness Yearbook 1996. The survey of 2,500 business leaders world-wide ranked Chile 15^th. It placed top among all Latin American countries and it was boosted five notches from 1995's ranking. Chile was also awarded the "A" rating from the Economist Intelligence Unit (March 1996 Report) for its safety of foreign investments, thus, making Chile the first and only country in Latin America to earn this level of investors confidence.

In this presentation, I will talk about Chile's accomplishments in the economic sector. I will make references to this nation's present situation from a global point of view as well as within its Latin American context. More specifically, this work will include an overview of Chile's economic, social and technological advances, as well as its new challenges in addition to the role Chile plays within Latin America today.

Why Chile?: Top Ten Reasons

Chile, no doubt, has one of the most competitive marketplaces in Latin America because it offers an open and modern foreign economic policy with clear and stable rules which favor trade and investment. This country also actively seeks to strengthen economic and political ties with Asia Pacific countries, Latin America, North America and Europe. Chile is a founding member of the United Nations, and member of the forum of the Asia Pacific Economic Co-operation (APEC) and the European Union (EU) and is associated with the Southern Cone Economic Market (Mercosur). Chile is currently negotiating its accession to the North American Free Trade Agreement (NAFTA). Also, in an effort to expand existing markets and open new ones, Chile has been able to negotiate complementary trade agreements with a variety of Latin American nations. Important accords have already been signed with Argentina, Bolivia, Colombia, Ecuador, Mexico, Venezuela, and most recently Canada and the UK (Economic Co-operation Agreement). Similar agreement is currently under discussion with Peru.

This is one of the reasons why foreign investment has kept a steady increase in Chile since the early 90's. In 1994, Chile's investments totaled 28% of GDP, the highest in Latin America. One third of that was foreign investments. The top investors in Chile for the period 1990-94 were the United States (33.5%), Canada (19.6%), Finland (7.3%), the United Kingdom (5.5%), Japan (4.7%), and Australia (4.1%).

The main mechanisms most frequently used by foreign investors is the Foreign Investment Statute which is known as Decree Law 600. This legislation guarantees currency markets for the repatriation of capital and profits, and at the same time it grants other benefits in taxes and customs duties. In a measure designed to avert the entry of speculation capital, foreign investors may repatriate only after a one-year waiting period, profits may be repatriated immediately.

In the areas of industry and services, and more specifically, mining has been and continues to be fundamental to the nation's economy, in spite of its decreasing importance in the trade balance. In 1994, mining was responsible for 44% of export earnings, with a value of $5.2 billion. Chile is the world's largest producer and exporter of copper (more than 25% of all copper reserves in the world), sodium and potassium nitrates and it is the world's second largest producer of lithium, molybdenum, and iodine. In precious metals, Chile is sixth in silver and ninth in gold production.

Agriculture is also very important to Chile. The nation has learned to profit from its geographic location, soil and climate conditions by promoting the development of the agricultural sector, especially in the areas of fruits and vintages. Chile is a net agricultural exporter, with exports of more than two times greater than imports. Fresh and processed fruits and vegetables account for more than 70% of the total farm exports. Grapes, apples, pears, kiwis, plums, nectarines and peaches are the principal fruits that Chile exports. The modernization of the wine industry, added to the fine quality of the grapevine , has enabled Chilean wines and champagnes to successfully enter overseas markets.

Fishing is another sector that has experienced the most dynamic growth in the last decade. The development process was stimulated by the Central Fishing Law of 1991, which also ensures the protection of hydro biological resources and prevents over-exploitation. In addition to traditional fishing, salmon breeding has grown rapidly. Chile exported salmon for the first time in 1984, with a total of 100 tons. In 1994, total salmon exports reached 76,000 tons. Today, Chile is the second largest exporter of salmon after Norway. The most important markets are Japan, the United States, France and Germany. Besides salmon, the country produces many other fish and shellfish products, which includes trout, hake, king clip, sea bass, abalone, sea urchin, scallops, octopus, shrimp and crabs.

Forestry. Forty-five percent of Chile's continental territory is suitable for forestry, and 7.4 million hectares are covered with native forests. The mainstay of Chile's forestry activities is the plantation of trees which cover over 1.6 million hectares. The radiate pine, which grows 15 times faster in Chile than in any part of the world, is the most commonly planted variety. Chile is conscious of the need for long-term planning and this is reflected in the present legislation, which promotes rational management of renewable natural resources. Chile is also ranked among the world's largest exporter of cellulose. In addition, Chile exports pulp, sawn wood, newsprint, planks, veneers and furniture.

The manufacturing of goods has become an increasingly important player in Chile's economy. In 1994, exports from this sector accounted for 44.8% of the nation's total. Chile manufactures from sophisticated machinery to small household articles and everything in between, including cosmetics, prescription drugs, books, toys and medical equipment and supplies.

Another area in which Chile has done a lot is communications. There is a record level of investment, state-of-the art technology and an open market account for Chile's remarkable development in telecommunications. The installation of fibre optics began in 1991. By 1994, 100% of Chile's telephone system was digital. Another unique aspect to long distance calls is the multi-carrier system. This system enables users to choose among a dozen domestic and foreign firms placing long distance and international calls. This progress does not only strengthens Chile's current telephone system, but forms the backbone of the information superhighway of the future.

The growth of imports and exports has made significant demands on the nation's infrastructure. A vast program is underway to improve and construct new roads, tunnels and bridges. Due to Chile's interest in becoming a link between the Asia Pacific nations and the Mercosur nations, government planning has given priority to the construction of eleven border passes where there used to be only two across the mountains and to the improvement of ports and airports.

Energy. Chile' electrical power capacity has increased by 69% during the past twelve years. Hydroelectric resources in Chile are primarily located in the central and southern regions. In the south, coal is also found in abundance. In the deep south, unexplored natural gas reserves have been identified. Natural gas is exported to Argentina.

Chile also is home to a modern banking and financial system. Leading financial institutions include Pension Funds Administrators known as AFPs, insurance companies, leasing firms, securities exchanges and foreign capital funds. Most of these institutions are private and many are foreign.

Tourism. The wide diversity of Chile's landscape makes the nation a natural for tourism and adventure. Revenues from this industry has grown steadily in recent years and today accounts for the equivalent of 9% of Chile's total exports. Attractive opportunities exist for investments in the construction of hotels, tourist complexes, ski resorts and amusement parks. Projects worth US$942 million are already underway, primarily in the area of real estate development. The capital involvement in these projects is mostly Spanish, Italian, English, US and French.

In sum, the Chilean economy has had positive, uninterrupted growth levels in the last ten years combined with important advances in the reduction of inflation in a gradual and sustained manner. Chile has enabled its productivity to increase at a rate of 7% per annum over the last five years, and the inflation rate for the year 1996 was 6.6%, the lowest in 36 years. Eduardo Aninat, Chile's Minister of Finance, in a recent address to the Chilean National Congress with regard to Chile's economic results for the year 1996 and throughout this decade, he stated:

These macroeconomic achievements have not burdened, but rather empowered our social policies and objectives in reducing poverty and achieving equality of opportunities for our citizens.

These positive results have shown that the commercial sector has demonstrated how important it has been for Chile to orient its economy towards integration with the global economy in order to increase the potential of its export sector. During the year 1996, Chilean exports totaled approximately US$16 billion. Chile has expanded its export levels which have been evenly distributed across all sectors, from mining to newer, non-traditional products. Also, with regard to international commerce, Chile today is challenged by the services sector which comprises approximately a fourth of all international businesses. In addition, and because of Chile's growth in exports, the country has internationalized the financial sector, and this constitutes Chile's new phase of development since it complements the export of goods, which in the case of finance, usually incorporate very highly skilled labor.

Impact of Chile's economic success

Chile is certainly thriving in democracy, modern shopping centers filled with customers, and its impressive economy is the envy of many industrialized nations. However, culturally speaking, Chile lives in the past. It is the only democratic country in which the constitution promotes censorship of films and television. Many blame the cultural stagnation and conservatism on the military dictatorship that lasted for 17 years. Under the Pinochet dictatorship, writer José Rodríguez says, " intelligence was considered dangerous, so what occurred was a cultural blackout." Chileans can still feel its influence. Theaters, television and cinema tell about the impact of conservatism. Cable operators--exerting self-censorship--black out many programs that, in the rest of the hemisphere are considered inoffensive. Chile's cultural conservative elite and the Catholic Church have censored films like "Fiddler on the Roof" and "The Last Temptation of Christ." And lately, the ultra-conservative Christian lobby groups want to block certain channels on a direct TV satellite system which is about to become available. Francisco Donoso, director of a group called "The Future of Chile," argues that it's all about saving what is right: "the moral and spiritual heritage of humanity which was instituted by the Catholic Church is what we want to preserve." However, there is a growing group of Chileans who are rebelling against what they consider the rule of the inquisition. They are demanding that political and economic freedom be accompanied by cultural freedom.

Another impact of Chile's economic success concerns the country's current increase in the immigrant population. A CNN World Report states that Chile has seen an influx of foreigners who have arrived in Chile in hopes of finding a better life. The fact is that this South American nation, with an annual growth of about 7% over the past decade and a low jobless rate of 7.1% has attracted many newcomers. Most of them come from as close as Argentina and Perú and as far away as India and South Korea. They work as shopkeepers, doctors, musicians, and laborers. Many stay illegally after entering the country with a tourist visa.

The number of immigrants is still low, and far less in impact than that experienced by the United States, nevertheless, the newcomers have set off a similar debate over the potential effect on the country. On one hand, some Chileans are not worried. They believe immigrants bring new skills and ideas that benefit Chile's economy. Belisario Velasco, the Deputy Interior Minister who oversees immigration , stated in an interview : "We are interested in receiving foreigners---professionals, people bringing investments...we just ask from them to respect our Western culture." On the other hand, a different group of Chileans, see the immigration flow that began in 1990 as a negative. They argue that foreigners are taking jobs from Chileans. A Chilean musician says that foreign colleagues, especially Cubans, "are leaving us arms-crossed, with no jobs, because they accept work for less money." Another complain comes from the medical sector. Dr. Enrique Accorsi, president of the medical association says that about 10 percent of physicians in Chile are foreigners and he contends some lack proper qualifications.

There have been reports of isolated incidents of bigotry aimed at immigrants. A Korean woman was barred from a public bathhouse where the owners said other clients complained that her Korean diet made her "smell foul." The woman sued and won an $11,000 award for "moral damage." Sociologist Bernardo Arroyo says that "racism exists in Chile and always has." Julio Cárdenas, a black Cuban who immigrated five years ago with his Chilean wife and son, said he had been confronted with a few derogatory remarks to his race. He believes such troubles stem from the envy of some Chileans over his success as a restaurant owner. Newcomers from Perú, whose predominantly Indian people are darker and shorter than Chileans say they often hear nasty comments about their race and their looks. In spite of these reports, immigrants generally say that they are treated well and that the problems they meet are not serious, and they are happy because they have found what they came for. The current flow of immigrants is the largest since thousands of Germans colonized southern Chile a century ago. Germans still have a large influence in many southern cities. Overall, since 1990, 3,056 Koreans have legally registered as immigrants. Most have set up small shops selling textiles or imports from South Korea. There is an estimated 814 Cubans, most working as musicians, but members of the Cuban community believe there are as many as 6,000 others who may be working illegally. The government lists 9,110 Peruvian immigrants, but officials say 14,000 to 15,000 others are there illegally, most of them doing menial jobs. The Deputy Interior Minister Velasco estimates that 30,000 people are living in Chile illegally, but says that there is no reason for concern given the countries's population of 14.000 million. He says that only in extreme cases, such as drug traffickers, do they deport foreigners.

A third, and interesting outcome of Chile's economic boom is the country's desire to assist other nations in the region to achieve a better life. In a report from the Chilean newspaper La Epoca of the fifth of May of this year states that the Chilean Foreign Affairs Office has intensified Chile's aid to other countries in Latin America and also in other areas of the world. In order to accomplish such task, Chile opened the Agency of International Cooperation (AGCI) in 1993. Francisco Vío Grossi, its director, says this is what they call "horizontal cooperation" by Chile, and the agency has concentrated most of its efforts in helping Central American countries such as Guatemala, Costa Rica, Honduras, Panama, El Salvador, Nicaragua, and in the Caribbean, the English speaking islands that are part of Caricom, and Dominican Republic, Cuba and Haiti. This agency has also established a small nutrition program in Indonesia and in the Philippines. AGCI director, Vío Grossi also added that his agency is in the process of starting a new program of cooperation with Eastern European countries this year because they have asked the Chilean agency to help them with their economy.

The Chilean Agency of International Cooperation has made Haiti its top priority since this country is the poorest nation in the Western hemisphere. The Chilean government has promised 80 million pesos in aid to Haiti. One of the main areas Chileans are trying to help is in health education. Chileans are helping the Haitian people to organize the internal administration of their hospitals and they have also set up an educational program aimed at instructing nurses in the field of obstetrics. The Chilean agency has also worked with the Haitian national office of vital statistics records. In addition, Chilean teams are working in Haiti organizing and developing this Caribbean nation's economy by setting up small and medium size businesses in which the Chileans instruct them on how to attract investors.

In Central America and in the Caribbean, Chileans cooperate with various other countries in the region where they help them initiate environmental programs, also how to fight poverty, modernize the government, and to develop small and middle size businesses among other projects. The AGCI director says that they have planned for about 202 different other cooperation projects including seminars, technical assistance and scholarships to countries in need in Central America and in the Caribbean. Chile has destined about 3 million dollars for such programs and the money is used to pay for travel costs, board and room because all the work is done without monetary compensation to their participants. Chile sometimes will work with a third party such as northern European countries to help pay for program expenses. Chile believes that they solely interest is not only to compete, but also to help and cooperate with others. They recognize that they themselves received foreign aid in the 50's, 60's, 70's and 80's, specially at the time when they were trying to consolidate their democracy right after the Pinochet regime.

Finally, what about Chile's future? In 1993, American economist and futurist Alvin Toffler, in expressing his hopes for the country, he said:

Chile must look at the world with a new kind of vision. It must seek increasingly specialized markets niches, and it must add more value to its products.

Just as Toffler prescribed, Chile has responded in industries as diverse as manufacturing, mining, forestry, produce, wine, and aquaculture. Chile's successful economic development has made it a competitor in markets worldwide. According to the Chilemerica! Electronic Magazine, while business from the Americas, Europe, and Asia focuses on Chile, it is the proliferation of partnerships between Chile and other nations that will be the key to the country's future.

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