Chile, a dynamic economy with strong inequality

Posted on October 22, 2019 at 18:36

If rising subway ticket prices were the source of the country’s first tension, it would be a deeper fatigue that weighs on Chile.

Moreover, even if President Pinella cancels the decision to raise public transport prices by 30 pesos, some people are now questioning the Chilean economic system.

Liberalism without nuances

However, Chile is considered a model of Latin American political and economic stability. Its recent model began during the administration of the dictator Pinochet. At that time, Milton Friedman, who won the 1976 Nobel Prize in Economics, began to provide his way to put an end to the surge in inflation. Since then, a liberal model with no nuances has been built in the country that has become the “Chicago Boys” test site. This is how Chile’s economic “miracle” develops in a deprived country with regulated inflation and explosive growth.

Slow growth

Even today, and despite social tensions, Chile’s growth is expected to reach 2.5% of GDP, which is one of the highest in the region. And the poverty rate is 8.6%. Latin American exception. By the way, this rate reached 26.5% in 2017 in Brazil and 21.1% in 2018 in Costa Rica. But these “good” numbers are not necessarily the direct result of a liberal year under Pinochet. “” In reality, the liberal impulses of 1973 did not always work. In 1982, international private banks suffered heavy debt and banking crises. “Carlos Kennan, Professor of Economics at Sorbonne Nouvelle and Vice President of the American Institute, explains. “Between 1983 and 1990, this somewhat primitive liberal recipe was modified.”..

And the dynamism of Chile’s economy, boosted by the boom in copper demand until 2012, then loses momentum. In the 90’s, the country’s growth was 6-7%, but now it’s about 2.5%. A good person in the current context, “This weak growth creates employment, but it remains fairly volatile. Some social sectors, especially the lower classes, are very vulnerable.”Carlos Quenan continues.

Strong inequality

Therefore, the Chilean model is at the origin of the strong inequality pointed out by the demonstrator. As early as 1980, Jack Chong Kol, a former agricultural minister of the then-bankrupt President Salvador Allende’s government, pointed out the setbacks in the production of this new model in a daily letter to “Le Monde”. bottom. “A very strong concentration of wealth and income, in favor of the richest and disadvantageous to the poorest.”

Almost 40 years later, Chile is one of the leading countries after South Africa and Costa Rica in terms of inequality, with a Gini coefficient of 0.46. Therefore, 1% of Chileans own 26.5% of GDP.

Today, the debate revolves around education and pensions. Ten percent of Chilean employees’ salaries are paid during work, but many receive pensions below the minimum wage. Especially because social spending is very low in the country. By the way, in France it is 31.2% of GDP in 2018, but the weight of spending in Chile is 10.9% of GDP.

For many professionals, it is this discrepancy between dynamism and inequality that drives tensions today. In a wealthy situation, the family is now taking out a loan with anxiety about debt. “Chile has become a high-income country. However, due to the nature of growth, the privatization of the economy as a whole, there is a large sector that is very vulnerable and we want our children to go to school now, but the budget is tight. There are middle and low class people who are too fair. “Carlos Quenan says.

Percentage of private investment in higher education “Basically, it depends on the tuition fees that students receive.”OECD reports. “More than 60% of total spending is funded by Chilean private funds.”..

In addition to that, the healthcare system still suffers from privatization. “If you don’t have expensive private insurance for your monthly payments, you have to go to a public hospital that isn’t the best. The country is more prosperous and much more modern, but some are left behind. Therefore, small problems such as an increase in subway tickets by 30 pesos can cause anxiety and anxiety. “