View the information below regarding the economy of Chile. The summary and statistics contains
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GDP: $67.7 billion.
Annual real growth rate: 1.9%.
Per capita GDP: $4,200
Forestry, agriculture, and fisheries (7% of GDP): Products--wheat, potatoes, corn, sugar beets, onions, beans, fruits, livestock, fish.
Commerce (11.6% of GDP): Sales, restaurants, hotels.
Manufacturing (17.4% of GDP): Types--mineral refining, metal manufacturing, food processing, fish processing, paper and wood products, finished textiles.
Financial services (13.4% of GDP): Insurance, leasing, consulting. Mining (8.6% of GDP): Copper, iron ore, nitrates, precious metals, and molybdenum.
Trade: Exports--$18.5 billion: copper, fishmeal, fruits, wood products, paper products, fish, wine. Major markets-- U.S. 20.7%, EU 24%, Japan 11%, Brazil 3.5%. Imports--$15.8 billion: petroleum, chemical products, capital goods, vehicles, electronic equipment, consumer durables, machinery. Major suppliers--EU 19.1%, Argentina 19%, U.S. 16%, Brazil 8.6%, China 6.7%, Japan 3.4 %
After a decade of impressive growth rates, Chile experienced a moderate recession in 1999 brought on by the global economic slowdown. The economy began to recover in 2000 with 5.4% growth, but the rate of growth slowed to 3.0% in 2001 and 1.9% in 2002. Chile’s GDP is expected to grow 3%-4% in 2003.
Chile has pursued generally sound economic policies for nearly three decades. The 1973-90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization at a slower pace. The government's limited role in the economy is mostly limited to regulation, although the state continues to operate copper giant Codelco and a few other enterprises. Chile is strongly committed to free trade and has welcomed large amounts of foreign investment. High domestic savings and investment rates also helped propel Chile's economy to average growth rates of 8% during the 1990s. The privatized national pension system has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 20.7% of GDP in 2002.
Unemployment has hovered in the 8%-10% range in recent years, well above the 5%-6% average for the 1990s. Wages have risen faster than inflation as a result of higher productivity, boosting national living standards. The share of Chileans with incomes below the poverty line--defined as twice the cost of satisfying a person's minimal nutritional needs--fell from 46% of the population in 1987 to 21% in 2001. Chile’s independent Central Bank pursues a policy of maintaining inflation between 2% and 4%. Inflation has not exceeded 5 percent since 1998. Chile registered an inflation rate of 2.8% in 2002 and is expected to see a 3% increase in 2003. Most wage settlements and spending decisions are indexed, reducing inflation’s volatility. Under the compulsory private pension system, most regular workers pay 10% of their salaries into privately managed funds.
Both foreign and domestic investment in Chile have declined since the boom years of the 1990s. Total foreign direct investment flows in 2002 fell to $1.6 billion, down from $4.6 billion in 2001, $3.6 billion in 2000 and $9.2 billion in 1999. Sluggish global economic growth and volatility in other Latin American markets have reduced investment flows to Chile, although the Chilean economy has avoided crisis. The Chilean Government committed in early 2002 to undertake a series of microeconomic reforms designed to create new incentives for private investment. The government has also encouraged the use of Chile as an “investment platform” for multinational corporations planning to invest in the region.
Chile's welcoming attitude toward foreign direct investment is codified in the country's Foreign Investment Law, which gives foreign investors the same treatment as Chileans. Registration is simple and transparent, and foreign investors are guaranteed access to the official foreign exchange market to repatriate their profits and capital. The Central Bank lifted in May 1999 a 1-year residency requirement on foreign capital entering Chile under Central Bank regulations, generally for portfolio investments. A modest capital control mechanism known as the "encaje," which required international investors to place a percentage of portfolio investment in non-interest-bearing accounts for up to 2 years, has also been effectively suspended through reduction to zero of the applicable percentage; the mechanism could be resurrected depending on economic circumstances. If it receives Congressional approval, the U.S.-Chile Free Trade Agreement (FTA) would impose some limits on this faculty and offer a number of other investor protections.