Chile’s economy Essay

According to the CIA world fact book, Chile is located in the southern part of South America and it borders the South Pacific Ocean. It is endowed with natural resources like copper, iron ore, timber as well as precious metals. A brief history of Chile’s people in terms of their literacy levels and demographics is vital in as far as understanding any economy is concerned. Chile’s population as at July 2008 stood at 16 454 143 with the highest proportion in terms of age structure being from the 15-64 years category, the dependent age group 0-14 account for 23. 6% and those aged 65 and above account for 8. 8%. This is a plus to her economic growth as a large proportion is comprised of energetic or productive people. The population growth rate according to CIA estimates was 0. 905% while the death rate and birth rate were 14. 82 birth/1000 and 5. 77 deaths/1000 population respectively. (CIA, 2008). Chile records a very high literacy level at 95. 7% for the total population with makes recording a slightly higher rate by 0. 2% CIA further noted that Chile’s government spent approximately 3. 2% of the country’s GDP on education in 2006. This paper focuses on Chile’s economy; of much importance will be the economic reforms that took place, as well as trade and its effects on her economic progress. In his distinguished book ‘Economic reforms in Chile’, Ricardo noted that since her independence Chile remained stable politically as well as economically thus being the envied state in the Latin America. Chile survived the constant extent shocks or forces beyond her control and modernized her institutions while ensuring increased economic progress. Inequalities in incomes were visible as early as 1970’s as the emerging middle class that lived in the urban areas grew. (Ffrench-Davis R, 2002). The inequalities in income distribution precipitated the increased political developments to rectify the situation to an extent that the political development did not match the economic progress. Effros in ‘Current Legal Issues Affecting Central Banks’ noted that Chile’s economic reforms started as early as the 1970s and before this period the state owned companies had a significant role in the countries economic growth. (Effros R, 1995). Before the World War 1 erupted Chile was recording a positive and diversified economic growth and the economic elite influenced the consumption trends. The growth was blamed on trade where exports were quite significant and so were the spill over effects on the economy. Before the direct depression hit Chile’s economy was among the most developed within the Latin America region in terms of per capita income and social transformation. Some people argue that Chile was among the most adversely hit countries by the great depression as when the thriving trade declined her terms of trade remained low up to the 1960’s. (Ffrench-Davis R, 2002). An industrial expansion in the early 50’s revived the country’s economic growth. The adverse effects of the Great depression especially on the trade sector were minimized by the economic policies put in place by the government. During the era of President Alessandri Palma a conservatist, fiscal measures as well as trade controls were put in place to counter the effects of a recession. There was need to develop new industries especially on the critical sectors like electric power and fuel as well as the human capital. During this period there was a general consensus that the state would effectively ensure that the situation was rectified. Problems experienced during this time included the stagnation of the agricultural sector and the unbalanced emphasis on imports substitution was to blame for the prevailing balance of payment. In the 1950’s there was a significant inflation rate precipitating the need for economic reforms. The Carlos Ibanez, government lost its popularity due to the prevailing economic conditions that people protested in the streets. (Ffrench-Davis R, 2002).