Economy of Chile

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Chile has a dynamic market-oriented economy characterized by a high level of foreign trade. During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio Aylwin - which took over from the military in 1990 - deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% during the period 1991-1997, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and because of lower export earnings - the latter a product of the Asian financial crisis. Chile's economy has since recovered and has seen growth rates of 5-7% over the past several years.

The Global Competitiveness Report for 2009-2010 ranks Chile as being the 30th most competitive country in the world and the first in Latin America, well above from Brazil (56th), Mexico (60th) and Argentina which ranks 85th.[11] The Ease of doing business index created by the World Bank lists Chile as 49th in the world that encompasses better, usually simpler, regulations for businesses and stronger protections of property rights.[12] The OECD agreed to invite Chile to be among four countries to open discussions in becoming an official member.[13] In spite of this, Chile still suffers from many problems common in Latin America, ranking higher than such countries as Mexico in terms of economic inequality and unemployment rate.[14][15][16]

Contents

Macroeconomic trend

After a decade of highly impressive growth rates, Chile experienced a moderate recession in 1999 brought on by the global economic slowdown and exacerbated by a severe drought reducing crop yields and causing hydroelectric shortfalls and rationing. Chile experienced negative economic growth for the first time in more than 15 years.[17] Despite the effects of the recession, Chile maintained its reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. After averaging real GDP growth rates of around 7% in the 1990s, the economy grew 3.4% in 1998 and contracted 1.1% in 1999. By the end of 1999, exports and economic activity had begun to recover. The economy has recovered in 2000, with Asian markets rebounding and copper prices edging up. GDP growth for 2001 is expected in the 5%-6% range. The inauguration of Ricardo Lagos in March 2000, succeeding Eduardo Frei, kept the presidency in the hands of the center-left Concertacion coalition that had held office since the return of civilian rule in 1990.

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