Chile

In Chile, the Economy’s Struggles Go Well Beyond Politics

Chile’s voters will head to the polls Nov. 19 to elect a new president. But no matter which candidate wins, the country’s economy will continue to languish until the price of copper rises.

Forecast

  • Because of its isolation from regional markets, Chile’s economy will continue to rely on copper production and exports for growth in the decades to come.
  • The next Chilean government will likely continue its predecessors’ conservative fiscal policies.
  • The downturn in government income will thwart any attempts to satisfy domestic constituents through increased spending.

Analysis

Conservative governments are making a comeback across Latin America after more than a decade of leftist dominance in the region. Chile could be the next in line for this transition. For the past two years, falling copper prices have slowed the country’s economic growth to a crawl, drawing many voters away from the ruling center-left coalition. Though Chile’s Nov. 19 presidential election is still months away, polls show that Sebastian Pinera, who previously served as president from 2010-2014 under the center-right Coalition for Change, has an early lead. (Alejandro Guillier, who is running for the center-left Radical Party, is in second place with around 17 percent of likely voters behind him, compared with Pinera’s 25 percent.) But no matter which candidate wins, Chile’s economy will face an obstacle far greater and more enduring than the current commodities slump: geography.

When Copper Was King

Chile, like neighboring Argentina, is isolated from the world’s major markets because of its geography. The country is lodged between the Andes Mountains to its east and the vast South Pacific Ocean to its west. And for much of its political and economic development, its regional trading partners were few and far between. The Argentine and Brazilian economies, for instance, did not industrialize until the last several decades of the 20th century. Thanks to its wealth of mineral deposits, however, Chile became an important source of raw materials — particularly copper — for construction and manufacturing sectors in the United States, Europe and, more recently,…

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