07 May 2011

Chile GDP Growth at 15.2% a Year as of March 2011

"Chile has always been held out as a model for Latin America, but the reality is ... it's now a model for the U.S.," he said.

Corporate taxes are the second lowest in Latin America at 18%, behind Paraguay's 10%. The Latin average is 28%.

Meanwhile, Goldman Sachs' chief economist for Latin America, Alberto Ramos, says Chile has wisely fostered growth by reducing the size of government and not printing too much money.

In 2011, it cut government spending to 5% of GDP, or $700 million, more than its projected 5.5%. So GDP has room to grow 6.4%, rather than 6% as first estimated.

Those lessons could be duplicated here with the ideas found in the Ryan budget, the Tea Party's policy ideas or even from the Chamber of Commerce. _IBD
Chile is a long narrow country along the southernmost strip of the western seacoast of South America. It is one of the few Latin American countries to take capitalism and free markets seriously. Consequently, Chile is on a stronger economic footing than most of the rest of Spain and Portugal's former colonies of the western hemisphere.
A year ago, Chile lay in rubble, victim of the world's fifth most powerful earthquake. So Chile's 15.2% growth is a big bounce from a bad setback.

But it shouldn't be dismissed as an anomaly. It's a showy number, but not the only one.

The same day Chile released its data, Goldman Sachs raised its 2011 growth forecast for the country to 6.4% from 6%. In its annual regional business index, Latin Business Chronicle ranked Chile as having the best business climate in Latin America in 2011.

Such numbers are so alien to the U.S. in the economically debilitated Obama era, it makes sense to look at what Chile has done.

First, Chile's policies for long-term growth were put into effect in the 1980s by the group of Milton Friedman-inspired economists known as the Chicago Boys.

Under them, Chile's pension privatization cost nothing and left the country with no net debt. The private funds now hold assets worth 90% of GNP ($185 billion) — capital used to develop the country. Already, Chile's education and infrastructure are the best in Latin America as a result.

Second, there's free trade, of which Chile is a global champion, signing at least 58 treaties to gain access to 2 billion customers.

That's a big reason Chile is close to full employment and is scrambling to attract growth-hungry U.S. entrepreneurs — and getting them. _IBD
Obama has chosen to rudely yank the US in the opposite direction, toward larger and more expensive government, exploding debt, greater divisiveness in the political and social sphere, and a ruinous expansion of dependency on government handouts and paychecks. Obama's revolution sounds more like the prelude to a new dark ages and reactionary socialist quagmire.

If forced to choose between Obamanomics and Chilinomics, which would you choose? Who is John Galt?


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Blogger kurt9 said...

The Chileans have pursued good economic policies. However, much of their recent economic growth is based on commodities (mostly minerals), which are in a bubble. The commodities bubble appears to have burst. We'll see how well Chile's economy does in a post-bubble environment.

Saturday, 07 May, 2011  
Blogger hofstb said...

Al Fin, Please don't go Galt. I love these updates.

Saturday, 07 May, 2011  
Blogger Loren said...

Considering that they seem to have kept their gov under control and so don't have excessive debt or other burdens to service with the higher revenues, they should do pretty good.

Saturday, 07 May, 2011  
Blogger J said...

Good copper prices. No Chilean miracle.

Sunday, 08 May, 2011  
Blogger al fin said...

Avoiding spiraling government debt and expansion is a wise move, regardless of commodity prices. Still, copper prices are likely to fluctuate within a high price range for quite some time yet.

South Africa is another mineral rich nation in with a nice climate, in the southern hemisphere. Contrast the trajectory of South Africa with that of Chile, and as yourself "why the difference?"

Chile has many attractive features for international business both in and out of commodities. Its remote location might even be an advantage in some ways.

Sunday, 08 May, 2011  
Blogger Hell_Is_Like_Newark said...

Chile's economy is no longer completely dependent on mining. Over 50% of their economy is now services. Plus they have a healthy agriculture / aquaculture sectors as well. Chile is now a first world economy.

Sunday, 08 May, 2011  
Blogger read it said...

What % of Chile's population is European?

Sunday, 08 May, 2011  
Blogger al fin said...

Between 50% and 60% of Chile's population is of European origin, with about 40% of mixed Euro-Indio origin. Roughly 5% are of Asian origin (including Chinese, Jews, Syrians, and Palestinians), with the rest native tribes and some Polynesians from Easter Island, Gypsies, etc. (Wiki etc)

Chilean socialists may have learned to avoid the revolutionary class struggle route that has hurt much of the rest of Latin America so badly. If not, Chile's period of affluence and stability may be at its high point.

Sunday, 08 May, 2011  

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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