The South American country is experiencing noticeable growth within the global economy, but social inequality, an out-dated education system and the nature of its labour market could pose a threat to its future.
Chile is synonymous with economic growth. Data published by a number of international organisations has forecast a promising future for the economy of the Latin American country.
The International Monetary Fund predicts that during 2013, GDP will grow by 4.5%, unemployment figures will decrease to historic levels of 6.2% and, according to forecasts, crime levels will remain stable over the upcoming months.
It is a situation that, according to the Finance Minister Felipe Larraín, will be accompanied by “higher wages and job creation”.
Chile, together with Peru, is one of the countries spearheading the development experienced in the region, which has attracted the attention of several experts who are analysing, studying and debating the economic evolution of the continent.
A report, reminiscent of a book, “Democratic Chile: The Politics and Policies of a Historic Coalition, 1990-2010”, looks for answers and gives both sides – not only the positive – of the socio-economic successes achieved in the country governed by Piñera.
Co-editor of the publication, Kirsten Sehnbruch, spoke with The Prisma saying that behind the figures “all that glitters is not gold”. Based on her analysis of the Chilean labour market and of Latin America, she comments that the employment rates that have been presented as “historic” only account for “formal employment”.
Richer, but unequal
“They don’t reflect the full picture, because they don’t recognise informal employment, where there is a 30% unemployment rate. They are lots of people who work for themselves, with unstable working conditions and for some very low wages”, she notes.
According to the World Bank, the sectors with the largest growth are retail, the service industry and mining. For Sehnbruch, one of the major mistakes that continues to be made when considering policy is “the high flexibility of the labour market”.
In her understanding, these policies could present a danger for the economic future and she argues that “there is a high level of temporary contract work. There are many good small businesses and many bad ones. Even so, the figures for economic growth have not put a brake on social inequality”.
This view has been confirmed by recent data published by the Organisation for Economic Co-operation and Development (OECD). According to the organisation, Chile is the country with the greatest wage inequality out of the 34 countries that make up the international institution.
Education on hold
To achieve equality, the OECD sees it necessary to “promote the participation of women in the labour market, to reform unemployment benefits and to improve the education system”, among other measures.
According to experts, education is one of the areas that have historically been waiting for attention. It is a fact that economic growth and development have been characterised by employing foreign workers, given the lack of a skilled national workforce.
“Education did not receive any investment during the 17-years of military dictatorship. Since democracy, the deficit has only partly been reduced, but educational achievements in Chile are very poor in comparison with countries that have closed the gaps in development, as with many Asian countries.”
She tells us that “many young people are still dissatisfied. When they finish university they are in debt and don’t have any job opportunities. This was reflected in the protests that happened in 2011. Students have made it necessary for right-wing politicians to include financial and political reforms on their agendas.”
Sehnbruch insists that one aspect of success to have promoted democracy are free market policies, and in terms of macroeconomics and fiscal measures, “Chile is one of the best examples on the planet”. On the other hand, it is a mistake not to have faith in “diversification of production and the export of resources[…] Policies from the dictatorship are being bought along and this has been a barrier to growth.”
South America: two economies
But Sehnbruch’s studies are not only focussed only on Chile. Throughout her professional career, she has also completed an analysis of development in South America, a continent where there are two trends.
On one hand, there are “countries such as Colombia, Peru or Mexico, which have taken methods adopted by Chile as examples”. On the other, there are “the countries such as Argentina, Bolivia and Ecuador, which follow the policies of the former Venezuelan president Hugo Chávez. These mark the Chilean free market system as being very ‘gringo’ and contrary to their principles”.
Asked about the recent death of President Chávez, she claimed that it would not have a large political bearing on the continent. “It will depend on the policies that come from Venezuela. Perhaps Cuba will be one of the countries that will feel the absence, as they’ve been receiving lots of support.”
Her book tackles human rights, among other subjects, which in reality has been pushed to one side in favour of development on many occasions. “Pinochet has been indicted along with some military personnel, who have made attacks on human rights.”
Yet, at the same time, Sehnbruch notes that “the subject of human rights is always seen as an issue tied to the past and important problems, such as discrimination, aren’t confronted with sufficient effort.”
It isn’t all victory and success. Chile continues to have a debt, not only economic, but also within society.
(Translated by Daniela Fetta)