Chile builds economy on export boom
Thanks to rising exports, Chile's economy is booming. But not everyone is happy, including those who say the boom hasn't been felt by the poor. In 1987, Chile's exports were $5.2 billion, up 25 percent over the previous year. Inflation ran about 20 percent, low for Latin America, and the country's gross national product grew 5.4 percent, second only to Peru in the region.
One reason for these gains can be seen in Chile's copper. In the mid-1970s, it accounted for 80 percent of its exports; now it is just 44 percent. Today, the list of exports includes apples, grapes, salmon and other fish, and the output of a growing mining industry besides copper, including new gold mines.
``The policy of near to free trade has transformed Chile into a dynamic exporting economy,'' says Jos'e Pinerra, a Harvard-educated economist and former minister in the government of Gen. Augusto Pinochet. ``The free market is proving that it works.''
Mr. Pinerra and others have been trying to transform Chile into a free-market economy. In the 15 years since the coup against socialist President Salvador Allende, Chile has privatized state-owned industries, encouraged ``popular capitalism,'' and drastically lowered tariffs on imported goods. The result is that exports now make up 28 percent of the gross national product, compared with 12 percent in 1973.
The benefits of higher exports, however, haven't reached the people who need them most, opponents of the government say.
``There has been nothing given to the poor of this country,'' says Francisco Granella, secretary general of the Humanist Party, a center-left opposition to the Pinochet government. Mr. Granella holds that the policies of the government have not paid enough attention to people on the bottom, especially the poor who congregate in Santiago.
``The minimum wage here is 10,000 pesos a month, about $40. You know what it costs to take a taxi here [about 800 pesos for two miles], so how can anyone live on that money?'' says Granella, a real estate broker. ``According to government figures, 45 percent of the population is living in poverty.''
But Pinerra, who went to school with Granella in Santiago, believes the success of the economic reforms and the free market will win the support of the population. ``Seventy percent of the people now own their own homes, and 60,000 shareholders own the principal banks,'' he says. ``This is the result of our popular capitalism program.''
Pinerra gives part of the credit for Chile's increased exports to its departure from the Andean Pact, a loose economic grouping of four South American countries. ``It had a market about the size of the Paris region,'' he says. ``We decided it would be better for Chile to deal with the world.''
In 1972, Chile exported to 60 countries, now it sells to 117. And it exports more than 1,300 products, whereas it once sold about 400. Chileans also seem to have captured the entrepreneurial spirit. In the past 15 years, the number of companies involved in export has risen more than tenfold, to 2,700. New products have been developed - such as fish farming for salmon, and new foods exported, like Granny Smith apples.
In the northern part of the country, irrigation techniques borrowed from the Israelis have brought green to one of the arid deserts in the world. In the Copiapo region, drip irrigation has brought 18,000 acres into production. The product is table grapes that earned $40 million in exports last year.
In the same region there is new mining development by several international companies. One of the largest sites is being developed by a Brazilian-Canadian consortium called Consolidated TVX. The La Coipa mine is 14,800 feet above sea level at the end of a dry, dusty valley. An entire mountain will be turned into gold and silver. A mill is being carted piece by piece to the remote site, and it will be producing 500 ounces of gold a day by early next year.
Other foreign investors include Alan Bond, the colorful Australian businessman, who has bought control of Chile's telephone system at a cost of $270 million. Two New Zealand companies, Fletcher Challenge Ltd. and Carter Holt Harvey, have invested $300 million in the timber business. Carter Holt Harvey also owns a piece of a fishing company whose annual catch is greater than the total catch of New Zealand.
Total new foreign investment in Chile last year was $2.17 billion. Mr. Bond and others are making their investments through debt-equity swaps. The investor buys the Chilean debt from, say, an American bank - at a 35 percent discount - then with the encouragement and help of the government converts that debt into an equity position in an enterprise in Chile.
Foreign investment has other benefits as well. Chile is the only country in Latin America that has actually paid some principal of its debt. Still, the national debt is $19 billion, and the country had a severe recession during the international debt crisis in 1982.
Chile's finance minister, Hern'an Buchi, recently told a group of foreign investors in Santiago, ``Chile has not missed any interest payments on its debt.'' The economist, educated at Columbia University, says his country welcomes foreign investment, even in the resource sector, which was nationalized by former governments. ``The big mines in Chile are still owned by the government. But the government is not looking for any new mineral deposits, and mines will not be owned by government in the future.''
But the opposition says the best way to ensure that the economy stays free is to return to democracy as quickly as possible.
``Pinochet is the best marketing tool the Communist Party has,'' Granella says. ``We have to get rid of poverty. This is still a very poor country.''