3. Location West of Bolivia
West of Argentina
South of Peru
Bordering on Pacific
Ocean
Chile is a Pac Rim
country.
Capital is Santiago
4. Specific Facts
Population of over 16 million
Spanish is the primary spoken language
GDP is 49% industry and 44% services
Labor force is 7 million, primarily in services
With 8.3% unemployment
5. Significant Factors
18.2% of the population is below the poverty
line
Inflation rate (CPI) is 2.1%
21% of total GDP is accounted for in
investment
10.5 million out of 16 million have cell phones
6.7 million out of 16 million are online
6. Political Overview of 1970ies
In 1970, Salvador Allende (Marxist) is elected
Nixon orders CIA to intervene
Chilean military officers plan a coup, Commander-
in-chief General Rene Scheider disagrees and gets
assassinated
1973, Political deadlock, street demonstrations and
work stoppage.
1/3 of US embassy on CIA payroll
August 23, Allende promotes Pinochet to
Commander-in-Chief
On September 11 Pinochet performs the coup and
seizes control of government until 1990
7. This time…
Chile used an open trade system
Low import tariffs
Low exchange rate controls
Low trade controls
Low restrictions on capital flight
8. Land Market Reforms
While under Marxist rule, 50% of total land
was public
Privatization began in 1974 and
encouraged small farms to be managed
by owners
1978 ban on corporate ownership of land
lifted
28% of land was returned to prior owners
The remainder was auctioned
9. Debt Crisis
1982 the Debt Crisis hit Chile
Unemployment above 20%
Most banks went bankrupt
Chile in severe distress
1983 financial sector of market was
nationalized
Subsidizing and rescue of banks caused
Central Bank deficits, leading to increased
inflation
10. Response to Crisis
1985 Pinochet went with economists whom
advocated free markets and
macroeconomic disciplines
Adopted new policies
-reestablish growth
-reduce debt
-increase financial and manufacturing
sectors
11. Relief
With these new policies, capital flight controls, the
help of the International Monetary Fund (IMF), and
the World Bank Chile was able to cope with and
end the Debt Crisis.
12.
13. Reasons for Success of Chile
Fiscal discipline
Inflation control
Strong financial and capital markets
Excellent trade-export system
Investment in institutions and education