WINNING IN THE GLOBAL ECONOMY: CHILE'S DARK VICTORY

PCDForum Column #79 Release Date June 1, 1996

by Sara Larrain R.

A recent survey of 2,465 international business leaders conducted by the International Institute of Business Development declared the Chilean economy the most competitive in Latin America and the fifteenth most competitive in the world. The ranking was based on four criteria: government commitment to open markets, the ability of the society to adapt to the demands of global competition, aggressiveness in world markets, and government policies favorable to foreign investors.

Indeed, the Chilean economy has maintained a 6 percent annual growth rate for the last 12 years and achieved a fifteen fold increase in exports-a remarkable record. Mainstream economists attribute this economic miracle to Chile's shift from a closed industrial system centered on an internal, regulated and protected market, to an export-led growth strategy based on exporting raw materials, privatization, deregulation, and integration into the global economy. Unfortunately these economists fail to ask a basic question: "Who benefits?"

If they were to delve a bit further into the Chilean experience they would find that Chile's success has been purchased at a high price-depressing wages, suppressing labor unions, bearing the health burdens of terrible pollution, and turning a blind eye to the long-term consequences of the unsustainable extraction of Chile's natural resources-both renewable and nonrenewable. Many of us are now pointing out that success based on such short-sighted practices is inherently unsustainable.

While visitors are often impressed by the evident prosperity of Santiago's spreading upper and middle class suburbs, those who look behind this facade find that 4 million Chileans, 30 percent of the population, live in poverty. One million of these live in absolute destitution. Income inequality has been increasing since the beginning of the military dictatorship, and continues to worsen. Especially troubling is the fact that nine out of every ten dollars in export earnings comes from the export of raw or semi-processed materials. Of these exports, 45 percent come from the mining sector, 17 percent from agriculture, 14 percent from forestry and 12 percent from fishing. Sixty-five percent of Chile's exports consist of only ten products: copper, gold, fish-meal, frozen fish, grapes, apples, raw and bleached cellulose, pine lumber and wood chips. Pollution has become so damaging to health in some areas that the government has designated them "pollution saturated." The environmental damage of mining operations is especially severe, but both government and the companies plead they are too poor to do anything about it. There is no legislation providing for the restoration of mined lands once the mines are closed.

Heavily subsidized forestry sector exports increased from $130 million dollars in 1974 to $2,040 million dollars in 1995. Only 4 percent of the subsidies went to small tree farmers. A study by the Central Bank of Chile estimates that at current rates of extraction Chile's native forests will have disappeared by the year 2025, just 30 years in the future.

Policies favoring concentration of land ownership have combined with export crop subsidies to nearly wipe out the campesino farming economy. Increasingly farming is in the hands of large, often foreign owned, corporations. It is estimated that during the next few years an additional 100 to 200 thousand farming families will be forced to abandon the countryside for the city. In the last 10 years the use of insecticides has increased by 64 percent and that of weed killers by 221 percent. One hundred and thirty agricultural chemicals in use in Chile are black-listed by the United Nations as excessively dangerous to health. Hospital records reveal alarming increases in miscarriages and genetic malformations in some rural areas. Today, 45 percent of the agricultural soil in Chile is eroded.

In every sector the success of Chile's export model is based on externalizing social and environmental costs. We are making a few people very wealthy by exporting our natural wealth and trashing our eco-system. While this has given Chile a great competitive advantage in the world marketplace, it has been at a high cost to the majority of people. Furthermore, the success factors on which it is based cannot be sustained in the long run.

In terms of what World Bank economists choose to measure Chile may look like a miracle. However, to most people who look behind the facade it has been a dark victory. That is why, as citizens, we must reverse the process of integrating ourselves into the global economy and concentrate instead on restoring the integrity of our local economies and ecosystems.


Sara Larrain R. is coordinator of the Chilean Ecological Action Network (RENACE), Ecocentro, Seminario 774, Ñuñoa, Casilla 16784 Coreo 9. Santiago, Chile, phone (56-2) 223-4483; fax (56-2) 223-8909; Internet: iep@ax.apc.org and a contributing editor of the PCDForum. This column was prepared and distributed by the PCDForum based on her presentation to the Global Teach-In 2 of the International Forum on Globalization, Washington, D.C., May 11, 1996.


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