Happy Chile Independence day

“In 30 years, Chile has gone from being a Third World country to a developed one, raising per capita income to $17,000, achieving 6% to 7% GDP growth most years, and attracting billions in foreign investment.”  

We should take a close look at the three “pillars” of Chile’s growth:   

“First, Finance Minister Sergio De Castro made the central bank independent. He ended subsidies and cut government spending. He slashed bureaucrats from 700,000 to 550,000. It was a painful austerity in the absence of a big private sector.   In the first four years of the new government, Chile’s economy surged 32%.   Next, economist Jose Pinera, Chile’s Labor and Social Security Minister, privatized social security. The plan helped the government balance its books and let workers choose between personal retirement accounts or the bankrupt state-run pension system. Workers could keep their own money, invest it, decide when to retire, and, best of all, owned their pensions as property they could leave to heirs. Some 97% of Chileans switched.   Pinera’s privatized accounts not only outperformed the state system by a factor of 10, but the savings they created provided capital to rebuild the country.   The last step came as Chile slashed tariffs and opened itself to the world. It signed more free-trade pacts than any nation, 58 at last count, which gave it access to 2 billion customers, an outsize market to swim in for a relatively small nation.   That enabled the country to specialize in what it did best — seafood, fruit, wine and its traditional mining exports. Its citizens got rich.  All three pillars upon which Chile’s stunning transformation rests can be duplicated in any country, which is why so many imitate these reforms.”    

Chile stands in contrast to Venezuela, Bolivia, Argentina and Cuba.  Chile is growing and attracting investors. Those other 4 countries are poor and getting poorer.     

Best of all, Chile is a stable democracy and that is very important too.  Prosperity and political stability are rare in Latin America history.  You have them in today’s Chile.     

Cheers to Chile.  You’ve earned this day of celebration.   

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