Economy of Chile

Economy of Chile

According to businesscarriers, Chile is one of the most stable and dynamically developing countries in Latin America. The basis of Chile’s success in the economic sphere is the optimal combination of liberalization and openness of the economy, on the one hand, and effective state regulation, on the other. Structural transformations carried out during the years of the military regime and continued by democratic governments in the 1990s, along with prudent macroeconomic policies, ensure the relative stability and efficiency of the Chilean economy. In 1990-2001, the annual economic growth rate was 6.3%, which doubled the size of GDP to $66.5 billion ($4,333 per capita). After a slight economic downturn in 1999 (-1.0%), caused by the consequences of the Asian crisis in 1998, there is an increase in GDP compared with the previous year: 4.4% in 2000, 2.8% in 2001, 2.1% in 2002. In 1990-2002, inflation decreased from 27.3 to 2.8%. The number of people employed in the economy in 2002 amounted to 5.5 million people, unemployment in 1990-2002 did not exceed 10% of the economically active population (the lowest figure in 1997 was 6.1%).

In 2001, agriculture and fisheries accounted for 5.6% of GDP, mining 8.4%, manufacturing 15.7%, construction 8.1%, energy and water supply 10.8%, transport and communications – 3.3%, for other types of services – 45.1%. 13.0% of the economically active population is employed in agriculture, 14.0% in industry and energy, 8.0% in construction, and 65.0% in the service sector. Employment in the informal sector is estimated at 23%.

The basis of the mining industry in Chile is the mining and processing of copper, in terms of which the country ranks first in the world – 32% of world production. In 2001, copper production amounted to 4.7 million tons (1.6 million tons, 1990). The state company Codelco provides more than 30% of the copper mined in the country, the rest is accounted for by 20 leading foreign companies developing new deposits. The largest of them – Escondida – belongs to an international consortium, which includes companies from Australia, Great Britain and Japan. Copper export earnings exceed 10% of GDP. Iron ore (8.8 million tons, 2001), gold, silver, non-metallic ores (lithium, molybdenum, etc.) are being mined. In the 1990s up to 1/3 of foreign direct investment in the country (about $ 12 billion)

rapidly in the 1990s. the manufacturing industry, and especially export-oriented industries, developed. In 1990-2001, the share of food, beverages and tobacco increased from 25 to 32%, as well as chemical products (fertilizers, paints and varnishes, plastics) from 10 to 14%. In 2001, textile and clothing accounted for 4% of the value of the manufacturing industry, mechanical engineering – 5%, and other industries – 45%. In 1990-2001, the volume of production almost doubled, to $10.7 billion. The number of employees was 780 thousand people. (2002). Up to 50% of manufactured products are exported. The main part of export earnings comes from agribusiness (production of wine, drinks, dried, frozen and canned fruits and vegetables) – more than 20%, chemical, woodworking and pulp and paper industries. Thanks to the use of the latest technology and the influx of foreign entrepreneurial capital, in less than 10 years, Chile has managed to become one of the world’s top five wine exporters. The amount of foreign direct investment in the manufacturing industry at stake. 2000 was $5.7 billion. A significant role in the development of export industries was played by the state policy to stimulate domestic private investment (including the provision of tax and other benefits), the implementation of programs to support small and medium-sized businesses producing non-traditional exports, and assistance in promoting Chilean goods to foreign markets.  The amount of foreign direct investment in the manufacturing industry at stake. 2000 was $5.7 billion. A significant role in the development of export industries was played by the state policy to stimulate domestic private investment (including the provision of tax and other benefits), the implementation of programs to support small and medium-sized businesses producing non-traditional exports, and assistance in promoting Chilean goods to foreign markets.

Electricity production is 42.3 billion kWh (2002). 46% of electricity is generated by hydroelectric power plants, 27% by coal-fired thermal power plants, approx. 22% falls on turbine and gas and approx. 3% for diesel power plants. In terms of energy consumption per capita, Chile leads among Latin American countries – 2406 kWh (2000). Until ser. 1990s the production and distribution of electricity was concentrated in the hands of private national capital. Thanks to early privatization (2nd half of the 1980s) and accumulated managerial experience, Chilean entrepreneurs became active participants in the denationalization programs of the electric power industry in other countries of the region. Accelerated into the 2nd floor. In the 1990s, the process of transnationalization of the basic services sector in Latin American countries led not only to the displacement of Chile from regional markets, but also to the transition of the country’s largest energy companies under the control of foreign capital (mainly Spanish). The total volume of foreign investments in the industry in 1995-2000 exceeded 8 billion US dollars.

Agriculture plays a relatively smaller role in Chile’s economy compared to neighboring Latin American countries. The main volume of income from agriculture (about 60%) comes from fruits and livestock products. at the highest rate in the 1990s. increased production of grapes, vegetables and flowers. Thanks to the modernization and improvement of technical equipment, the number of people employed in agriculture and fisheries is decreasing (5.5 million people in 2002). Agricultural land occupies 3.8 million hectares (including 1.9 million hectares cultivated), natural pastures – 20.6 million hectares, forests – 15.6 million hectares. In 2002, it was grown (million tons): wheat 1.8, potatoes 1.3, tomatoes 1.2, grapes 1.7, apples 1.1. Chile is the largest producer and exporter of fruits in the Southern Hemisphere (grapes, kiwi and apples). Fresh fruit accounts for 8% of the country’s total export value and St. 77% agricultural (2002).

In 2002 there were 4 million head of cattle, 2.7 million pigs, approx. 5 million sheep. Livestock production amounted to: poultry meat – 402 thousand tons, beef – 214 thousand tons, pork – 312 thousand tons, cow’s milk – 2.2 million tons. Chile is a net exporter of poultry and pork, imports beef and dry milk.

Fishing is one of the most dynamic sectors of the Chilean economy. The annual catch of fish and seafood in 1996-2001 was 3.8-4.0 million tons (3rd place in the world after China and Peru). In addition to traditional sea fishing, which provides 60% of production and 40% of exports of fish products (mainly fishmeal, frozen and chilled fish), in the 1990s. In Chile, artificial breeding of salmon was mastered. In terms of production and export of these products, the country ranks second in the world, second only to Norway. For 11 years, the production capacity in this industry has increased 8 times, exports have increased from 122 million US dollars in 1990 to 969 million US dollars in 2001.

Road transport provides the bulk of transportation within the country. The length of highways is 80 thousand km, of which 19.4% are asphalted. The fleet includes 130 thousand trucks and more than 1.9 million cars. The length of railways is 4.8 thousand km. A third of this is used to transport goods, mainly copper (from mining sites to ports). Further development of road and rail transport is associated with the transfer of roads for reconstruction to private companies on a concession basis. Of great importance is maritime transport, which provides 95% of the total foreign trade turnover. OK. 80% of the volume of loading and unloading operations (23 million tons in 2000) falls on the four main ports – Antofagasta, Valparaiso, San Antonio and San Vicente (47 ports in total). Own merchant fleet consists of 85 vessels, capable of transporting more than 2.7 million tons of cargo. The ten largest ports are subject to privatization by 2005 (on a concession basis). There are 3 international and 32 national airports. The transportation of passengers for 1990-2000 increased 3 times – up to 5.3 million people. The volume of cargo transportation in 2000 amounted to 1.3 million tkm (5 times more than in 1990).

Chile has one of the most developed telephone systems in Latin America. In 1990-2000, the number of fixed telephone lines per 100 inhabitants increased from 5.3 to 21.1. In 2001, there were 3.3 million fixed telephone lines and 3.2 million mobile subscribers in the country. For every 1,000 inhabitants, there are 342 mobile communication devices, 106.5 personal computers, 288 televisions and 759 radios. Chile has 625,000 Internet users (2000), the highest figure in Latin America. From Ser. 1980s the country’s telecommunications systems are in the hands of private capital. The main telephone operator is Telefonika STS Chile, controlled by Spanish capital.

The number of foreign tourists who visited Chile in 2002, 1.4 million people. (compared to 1.7 million in 2000). The main part of foreign tourists (up to 50% in some years) falls on Argentina, among Europeans the list is headed by Germans, Spaniards and French. Due to the crisis in Argentina, the flow of tourists from this country has dropped sharply – from 860 thousand people. in 2000 to 515 thousand in 2002. On average, a foreign tourist spends 11 days in the country and spends approx. $60 per day. Chile has approx. 1800 hotels with a total number of beds for 105 thousand people. Seventeen hotels are classified as five-star (12 are located in Santiago and 3 – in the area of ​​the ski resort of Valle Nevado, high in the mountains). The country’s annual income from tourism exceeds $1 million.

The current economic and social policy of the Chilean government is aimed at ensuring macroeconomic stability, stimulating domestic private savings and investment, achieving sustainable economic growth while strengthening the social component of reforms. Largely due to the professionalism of the country’s leadership, the high manageability of the economy and the reliability of the credit and financial system, Chile managed to “compensate” the negative impact of the Asian crisis, global and regional financial shocks. 1990s Despite a sharp deterioration in the terms of foreign trade and a reduction in the inflow of foreign capital, the Chilean economy managed to get out of recession in a fairly short time. Chile’s economic growth potential is directly dependent on the dynamics of exports and on the country’s ability to compete in world markets. The main task is to move to a new stage of diversification of production based on the introduction of the latest technologies, to expand the export of goods with a higher added value, to develop new sectors of the economy using the management experience gained in the production of salmon and wine. This implies active state assistance to the private sector in conducting research, establishing market relations and in creating seed capital. A prerequisite for Chile to reach a new level of economic development is to improve the quality of education and training, raise the living standards of the population, and eradicate poverty and misery. The public sector produces approx. 9% of GDP (copper, oil and oil refining industries, metallurgy and banking).

According to a law of 1989, the Central Bank of Chile has autonomy and independence from the executive branch. In the 1990s in conditions of an excess supply of external resources, the Central Bank applied a system for regulating the inflow of foreign capital (a mechanism for the mandatory deposit of 30% of incoming funds with the Central Bank). In 1998-2001, taking into account the changed situation in the world financial markets, most restrictions on the movement of capital were lifted; the exchange rate policy was adjusted. In 1999, the Central Bank abandoned the currency corridor system, switching to a floating exchange rate of the national currency. In 2000-02, measures were taken to stimulate investment activity in the country, including lowering the refinancing rate and restructuring the debt of small and medium enterprises.

In terms of the level of development and reliability of the credit and financial system, Chile leads among the countries of Latin America. Between 1990 and 2002, the capital of commercial banks grew 1.7 times (up to $5 billion), assets almost doubled and amounted to $63 billion (96% of GDP). As a result of mergers and acquisitions, the number of credit institutions in 1990-2002 decreased from 40 to 26. There are 8 national commercial banks, 1 state bank, 16 foreign banks and 1 credit society. In 1995-2002, the share of foreign banks in the loan portfolio of the Chilean banking system increased from 14 to 45%. The first position is occupied by the Spanish bank “Santander-Chile”. In the Moody’s rating, which determines the level of stability of the banking systems of 75 countries, Chile in 1999 was in 15th place, ahead of the three countries of the “Big Seven”. In the 1990s the total assets of non-banking financial institutions increased 5.7 times ($54 billion, or more than 80% of GDP in 2001). The main institutional investors in the Chilean capital market are pension fund management companies (AFP) and insurance companies. Chile is a pioneer in the creation of a private pension system (1980), which allows the funds accumulated in individual accounts to be profitably placed on the domestic and foreign financial markets. On horseback In 2001, the volume of funds accumulated by the funds amounted to 36 billion US dollars, which is comparable to the size of deposits in the banking system. The main financial instruments operated by the AFP are the obligations of the Central Bank of Chile and mortgage bonds. AFP has been actively involved in the privatization process, investing more than $4.6 billion in shares of leading energy and telephone companies. The annual turnover of shares on the stock exchange of Santiago de Chile in 2002 amounted to 8.4% of GDP. 254 companies and banks have been listed; compared to 1990, the volume of market capitalization has increased 3.5 times – up to 47.6 billion US dollars (85.4% of GDP in 2002). The share of bonds in the total exchange turnover exceeds 95%.

Chile’s public finance policy aims to ensure fiscal balance while increasing social spending and public investment. In 1987-98 the budget was reduced to a positive balance. The decline in copper export earnings and the need for measures to stimulate business activity and address social problems have affected the state of public finances. The budget deficit of the central government as a percentage of GDP was: 1.4% in 1999, 0.3% in 2001, 0.8% in 2002. In 2000-02, tax revenues were provided by St. 75% of budget revenues, and their ratio to GDP exceeded 17%. Government domestic debt (excluding Treasury obligations to the Central Bank) fell from 22% to 9.6% of GDP in 1990-2001. State and state-guaranteed external debt at stake. 2001 was $5.5 billion (8.4% of GDP),

The volume of foreign trade in goods and services in 2001 exceeded 68% of GDP. Exports of goods amounted to 17.4 billion US dollars, imports – 17.2 billion US dollars. St. 47% of exports account for manufactured goods, 39% for copper, approx. 9% – for the products of agriculture, forestry and fisheries. at the highest rate in the 1990s. the export of finished industrial products grew (3 times in 1990-2001). Imports are dominated by raw materials and semi-finished products – 61% (including fuel and oil products – 15%), machinery and equipment (21%). The most important partners (2002,%): in terms of export – the USA (20.7), Japan (11.0), China (7.2), Mexico (5.2), Italy (4.9); imports – Argentina (18.1), USA (15.2), Brazil (9.6), China (6.9), Germany (4.4). There is a unified customs duty on all types of imported goods, the amount of which decreased from 11% in 1991-98 to 6% in 2003.

From 1999-2002, Chile continued to lead among Latin American countries in terms of the reliability of business transactions, which takes into account the degree of risk of capital investments in the country, and had one of the best credit ratings among developing countries “A-“. The total volume of foreign direct investment in 1990-2001 amounted to approx. 46 billion US dollars (net inflow in 1999 – 9.2 billion dollars). A significant part of the funds received in the country in 1996-2001 went to the acquisition of controlling stakes in Chilean companies operating in the field of energy supply, telecommunications and sanitation, as well as financial institutions. The share of foreign direct investment in Chile’s total investment in fixed assets was 32.6% (2001).

The implementation of programs in the field of housing construction, education and healthcare, high rates of economic growth made it possible to improve the living standards of the population: the proportion of people living below the poverty line decreased from 40% at the beginning. 1990s up to 17% in 1998. The minimum wage is $1,781 per year (1999). The poorest 20% of Chileans account for 3.2% of total income, while the richest 20% account for 45.4%. The gap in income levels between them is 15.2 times. Since 2003, the country has been implementing a program aimed at supporting the poorest part of the population, which is financed from the budget.

Economy of Chile