May 19, 2014
Chile
I had some expectations before I started this trip–about Brazil and Argentina. Sao Paulo was, I discovered, not the place to go to fall in love with Brazil, but the place to go to do business. It was rather like going to Shanghai without Beijing (without Rio? The Amazon?). Argentina was every bit as con carne, Belle Epoque, and tango as I expected (and probably more volatile economically than expected).
But Chile?
At best it was Marxist (Allende, whose palace, built in 1796, where the air force bombed and killed him on September 11, 1973, was our last stop tonight); followed by right wing dictator Pinochet; mines, especially copper, and Chilean Sea Bass, one of the cause célèbre of environmentalists; and earthquakes. It is, after all, on the Pacific Rim of fire.
I was, therefore, a little surprised on the road into Santiago to find a modern expressway (my 1990 entrance to Beijing was delayed by a donkey cart ahead of our bus on the two lane road), fronted by high rise buildings, modern hotels (including Western chains)–and the wealthiest South American country in terms of per capita income (about 20,000, or about 40% of the US); as one of the business faculty complained, “It’s too modern.”
Part of the prosperity comes from the copper mines, which makes Chile the “Saudi Arabia” of copper. The salaries of the miners is about triple the average salary, and when they settled strikes, miners get a bonus of $40,000, which accounts for the traffic jams, since the bonus goes into new automobiles.
The Chilean miracle began in the mid 80s, with the overthrow of General Pinochet, and the gradual opening of markets and the economy. In fact, some of the steps began earlier, when generals decided to lower tariffs to make Chilean companies globally competitive. As one of our speakers pointed out, it was easier for a dictatorship to do so, even though it hurt business supporters of the generals. Other Latin American countries followed the model. The changes from the mid 1980s in terms of ownership of goods, of life expectancy, and decline in the percentage of poor, are impressive. In 1950, the index was 100; today it is 437, most of the change coming since the mid 1980s, the percentage of poor has shrunk from 45% of the population to 14% today. 46% of the population owns automobiles, a rough indication of the size of the middle class. And life expectancy is 79, the same as the United States. And the social changes–especially with a woman president–are equally impressive; divorce became legal in 2003.
One of our visits was to a foundation whose role is to increase innovation in the country. The joint public private organization has put its energy into four basic areas, that coalign with the nation’s big business, or strengths. One, of course, is mining: how to make it more efficient, such as ways to monitor the pipelines that transport the chemicals. A second area is agricultural. One of the foundation’s early accomplishments was turning salmon into a profitable export item, and selling the turnaround for a profit. A third area is in efficient use of water. The foundation has pioneered a water week, important for a country that is on the cutting edge of desert, with some areas that have not seen rain in 300 years. The final area involves energy–since this is another country in Latin America with fossil fuel shortages. Some of the emphasis has been on wind, and when we were in the mountains yesterday, we certainly understood why.
The major challenges as one of the speakers–a Columbia University Ph.d. in economics who is chairman of the Economics department of the University of Chile–outlined for us: how to sustain growth of 5%, particularly in an economy 50% of whose exports are still in copper; the answer there is move up the value chain and diversify into, say processing (China is only a purchaser of raw materials here, but has also started to export automobiles); the other is to narrow the gap between rich and poor. In developed countries, the rich 20% are 6–7 times richer than the poor; here, it’s 14X. Consequently, tax and other government policies are in question under the second term of the woman president.
One interesting fact came up when we visited the University of Chile, the leading school in the country. We were at the School of Business, and it’s pretty apparent in all three countries we visited that the great hope for the future lies in education. I was consequently amazed when I discovered that basically you decide on your career at age 17 when you a) take the national college entrance exams, and b) decide on a course of study. If you matriculate as an undergraduate business/econ major at the University of Chile, you have two years of introductory courses–only business and economics classes, and then two years of specialized courses in your business major. “No liberal arts classes,” I inquired? “No.” I wonder what my liberal arts colleagues at Illinois Wesleyan might say about that…..or rather, I know….
Today is the last full day of the FDIB trip. What a wonderful journey of discovery for me! And I hope, through this blog, for you, too!