Invest in Chile

"Chile-not a nation of proletarians, but a nation of entrepreneurs"
-Augusto Pinochet

The republic of Chile occupies a narrow coastal strip between the Andes mountains and the Pacific Ocean. Some of the world's best vineyards are nestled in the Andean valleys, and salmon farming is plentiful along the coast. The northern Atacama desert is rich in mineral deposits, primarily copper and nitrates. With the most advanced capital market and stable economy in South America, Chile's process of deregulation and privatization has led to what is widely known as the "Miracle of Chile."

Chile's free market miracle came at a very steep price. In 1970, after running for president three times, the radical Marxist candidate Salvadore Allende won a three-way contest for the Chilean presidency with 33% of the vote. By 1973, Allende's sweeping nationalization of entire industries, hiked government spending and public works projects had sent the Chilean economy into complete upheaval. The commander in chief of the Chilean armed forces, Augusto Pinochet, liquidated the Allende government with the support of the national police. A military junta was established immediately following the coup. On December 17, 1974 Pinochet declared himself president. His liquidation of Allende supporters was infamous for its brutality, legendary for its excesses, and utterly effective.

Under Allende, the revenues from nationalized enterprises, especially the copper export industry, had been used to fund "make-work" programs for the poor and unemployed. Pinochet ended that, under the advice of about 25 American free-market economists widely known as the "Chicago Boys" for their backgrounds with the libertarian icon, Milton Friedman, at the University of Chicago. Pinochet proceeded to privatize the pension system, state industries, and banks. He reduced taxes as well.

Contrary to free-market conventional wisdom, the first nine years of Pinochet's regime were no miracle: by 1982, Chile's economy was near collapse. Only after the world's central banks consented to devaluation of the Chilean currency did the Chilean economy rebound. Over the next twenty years, exports soared to over 31% of GDP. Copper fell to 40.5% of exports while nontraditional exports, among them salmon and wood pulp, paper, cardboard etc. boomed. The export boom fueled the economy's growth. After enduring a deep recession in 1982-1985, and severe employment adjustments in the aftermath of the Allende regime, Chile's economy bounced back.

In 1980 a new constitution was approved, prescribing single candidate presidential referendum in 1988. By May 1983, opposition and labor movements began to organize mass demonstrations and strikes against the fiercely-resented Pinochet. Pinochet was defeated in a 1988 referendum. Open presidential elections were held the next year and power was transferred to Patricio Aylwin.

In the last two decades of rapid economic growth, Chile's capital,Santiago has exploded into a metropolis of over 6 million people. Chile has forged ahead with privatization, free markets and open trade.

Recently however, Chile's economic growth has slowed. Real GDP growth rate for 2006 has fallen to 4.2% from 6.3% in 2004. Chile attempted to kick-start economic growth by signing free trade agreements with the United States and EU, hoping for more export opportunities.

Despite widespread consensus that Pinochet's ruthlessness was an atrocity, the economic tumult of 1970-82 is something few Chileans would like to revisit. Under center-leftist president Michele Bachelet, (the first authentic leftist president in the post-Pinochet era), the free-market institutions built by Pinochet remain sacrosanct. The strength of Chile's free-market institutions put Chile in a class apart from its more left-wing neighbor states, and Chile today boasts the highest per capita income and quality of life on the entire continent.