Chilean economy stalls as election nears

Global Business

September is the month Chileans celebrate independence and national culture in the Fiestas Patrias. It is also when many remember the 1973 military coup that overthrew the government of Salvador Allende.

So it is a month when this country reflects on its past. And in an election year like this one, it is also a time to consider its future.

CGTN’s Joel Richards explains from Santiago.

Chile has long relied on its natural resources – in particular, its abundance of copper for export.

At the government development agency CORFO, vice-president Eduardo Bitran said that the country must reach beyond that.

“There is a limit for a country that could grow based on the exploitation of natural resources. Bringing technology services to improve the productivity of the sectors where the Chilean economy is big, we could develop a more knowledge-based economy.”

Developing the business and finance sector, and adding value to key industries such as mining, is the aim.

But growth is slowing and cracks are appearing. The economy was recently downgraded by credit agencies. And the country’s entire economic team resigned in late August over the decision to block a mining project on environmental grounds.

Chile is working to diversity and transform its national economy but this year there are presidential elections and very much part of the debate here is how it can tackle the historic levels of high inequality.

Outgoing president Michelle Bachelet’s social reform package has largely been stalled. There have been demonstrations over education and pension reforms. At the independently-funded think tank Sol Foundation, Marco Kremerman said inequality remains the problem.

“Statistics show in Chile one percent of the highest income earners hold between 30 and 33 percent of the country’s capital. Compare that to data from Holland and Germany. The level of capital concentrated in the wealthiest one percent in Holland is 6 percent, in Germany it is 12 percent. Here it is a Paradise for accumulation of capital, that generates high level of inequality which is reflected most clearly in low wages.”

A recent jump in copper prices have brought some relief to Chile’s national finances. But the debate remains, not only on how to drive growth but how that growth is shared.

Peter Hakim discusses Chile’s economy and the challenges facing its future growth

CGTN’s Rachelle Akuffo spoke to Peter Hakim, president emeritus and senior fellow at Inter-American Dialogue. They discussed the challenges facing Chile’s economy and what prospects it has for the foreseeable future.