Some Facts About Chile’s Economy

Economy of Chile

First Published Date: September 7, 2011

Chile, a country in South America, is considered the economic miracle of Latin America. In only two decades, between 1988 to 2008, its economy doubled and then tripled, which means its economic growth increased 600 percent. According to the 2011 Index of Economic Freedom, Chile has the 11th freest economy on earth and Chile has the highest degree of economic freedom in the Central and South America region.

It took Chile almost three decades of endeavour to reach today’s position. Chile has a market oriented economy characterized by high volumes of foreign trade, sound economic policy, and reputed financial system. It’s no wonder that Chile enjoys the highest sovereign bond rating in South America. Chile was the first South American country to join the Organization for Economic Cooperation and Development (OECD) in 2010. In 2006, Chile became the highest nominal GDP per capita country in Latin America.

Chile was one of the few nations that handled the 2009 global economic downturn well and also the financial havoc caused by the 2010 earthquake. Its economic growth was 1.5 percent in 2009 cent and 5.2 percent in 2010. By law, the Chilean government is required to a fiscal surplus of 0.5 percent of its GDP. This used to be 1 percent before 2008 and was waived for 2009.

Chile’s independent Central Bank targets to keeps its inflation within 3 percent. However, inflation reached closer to 8 percent in 2007 and 9.9 percent in 2008. But inflation decreased to 2 to 2.7 percent in 2009 and 2010 – keeping it in line with Central Bank’s target range. Unemployment rate in Chile was 8 percent in 2010. Percentage of population below the poverty level stands around 14 percent. It was 46 percent in 1987 and 18 percent in 2005. Chile’s public debt to GDP percentage is 6.2 percent, which is lower than most countries. For example, United State’s public debt to GDP percentage is 99.32 percent.

Exports account for one third of Chile’s GDP and minerals account for half of the value of exports. Chile is the world’s largest producer of copper, with recorded copper reserves for 200 years and Chile’s copper alone provides one-third of its government’s revenue. Government owned CODELCO is the world’s largest copper producing company. However, Chile has beefed up its non-traditional exports as well, such as wood and forestry products, paper and pulp, wine, seafood, fish, fresh and processed fruits and vegetables. China, Japan, United States, Brazil, and the Netherlands are Chile’s largest export market.

Chile, while greatly improving its economy, still has some work to do. The country still has a great deal of poverty and a significant poverty gap, alone with environmental problems. The dependence on copper, weak employee skills and insufficient training, inadequate regulation, limited credit access, and limited product and technology infrastructure are some of the issues Chile will have to deal with as the country continues to move into the future.