Chile – trade and economy

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Chile was for a time the shining light in South America, it was seen as the model for economic growth for all its neighbours, with important industries such as copper, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, transport equipment, cement, textiles. The countries market-oriented economy is characterised by a high level of foreign trade and the major exports are copper, fish, fruits, paper and pulp and chemicals with Chile importing consumer goods, chemicals, motor vehicles, fuels, electrical machinery, heavy industrial machinery and food.

The economy itself has not lived up to previous expectations of earlier years; this has lead to a degree of social deprivation. The literacy rate (defined as those aged 15 and over who can read and write) in Chile is currently at 96. 2%, out of a population of 15 million this is good for a country sometimes viewed as economically backward. The demographics of the country show a good balance for Chile, the working population makes up 66% of the nation with a pension-age population of only . 7%. The GDP per capita of Chile is currently at $10,000 this compared to the USA at $37,000, Malawi at $670 and Chiles closest economic neighbour Argentina at $10,200.

This doesn’t quite give the whole picture, as there are 21% of the Chilean population below the poverty line, there is also evidence of a two-tier society as the bottom 10% of the population is responsible for only 1.4 % of consumption whilst the top 10% is responsible for 45. 6% of consumption, a truly remarkable difference between different sectors of society. Chile is developed in terms of the sectors its workforce works in the workforce currently breaks down as agriculture 14%, industry 27% and services 59%; this suggests a nation on the brink of developing to the extent that “the west” has seen. Currently unemployment in Chile is at 9. %, this due to poor growth as a result of a lacklustre global economy and the devaluation of the Argentine peso. The Chilean government had formerly been run by the military and they had provided a framework by which the democratic governments could implement sufficient economic reforms Chile had experienced phenomenal growth but in recent years this has slowed and unemployment is the biggest ask of President Lagos who has been charged with the mandate to improve living standards.

The current unemployment figures have remained around 9% for the past 5 years despite recent growth in the economy, this shows that current policy is having no real effect. The presence of a two-tier society is sure to hit Chilean economic success in the long-term, the 21% population under the poverty line need to be lifted out of the zone of destitution, however this percentage is not so bad when compared to the statistic of 17% under the poverty line in the UK.

The Chilean’s must find an answer to their long-term high unemployment; they must find a solution to the polarisation of their economy and they have to find a way out of the cycle of the poverty. Usually the advice from a market-orientated point of view is to deregulate markets but as it is this has been done and the country has opened itself up for all foreign traders to create demand but so far this has not eroded the unemployment.

I believe in this case government intervention has to be advocated, Chile needs to create jobs through government initiatives, a drive to better state-provision of healthcare, housing, education would ensure that the unemployment would be reduced, people could be educated to lift themselves out of the poverty trap and it could be funded by progressive taxation of those in the top tier of their two-tier society. This could work to appease Marxist rebels who have also worked to harm the Chilean economy.

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