Sara Larrain - National Coordinator-The Chilean Ecological Action Network-RENACE. 

Chile has turned out to be one of the faster learners in the implementation of the neoliberal model and was recently ranked among the most competitive countries in a survey of international business. 

According to the International Institute of Business Development's recent report, which is based on surveys of 2,465 business leaders throughout the world, our country holds 15th place in a global ranking of competitiveness. Other countries in the Latin American region were rated somewhat behind, starting with Brazil which ranks 31st, Argentina - 32nd, and Mexico, Colombia and Venezuela which tie for 39th place. 

The criteria of this ranking, are: government support for competition, the ability of society to adapt to and maintain competitiveness, aggressiveness in the world market and attraction for foreign investment. 

While Chile is having such success on the international scene, Chilean citizens want to know: who benefits. 
 

The Competitive Basis of the Chilean Economy

The Chilean economy appears to be very solid with a 6% annual growth rate for the last 12 years.  

This miracle was obtained by carrying out profound change, going from a closed industrial system centered on an internal, regulated and protected market, to an economic model based on exporting raw materials, privatization, deregulation and incorporation to the global economy. 

The principal elements of competition that have facilitated this incorporation into the global economy have been cheap labor, and the externalization of environmental costs (increases in the over-exploitation of natural resources, increased pollution, etc.). 

But the social and environmental costs of this competitive advantage has brought into question the social and environmental sustainability of the Chilean economy. 

Chile's arrogance in Latin America for its notable progress in combining growth of the GDP, macroeconomics stability in prices and a good employment index may be about to change due to the intensification of the environmental and social impact of growth, which is creating an increase in social stress for the population. 

Environmental unsustainability: 

From an ecological perspective, it is not possible to maintain the same rate of economic expansion of the last few years using the present production conditions. The environmental unsustainability of Chile's current export model is reflected in the collapse of species, the loss of ecosystems and agricultural land, the proliferation of zones which are saturated by pollution and the generalized deterioration of the health of the population. The externalization of environmental costs as a comparative advantage, which facilitated Chile's insertion into the international market, has now become a dead weight for the economy, and produced an environmental debt which must be paid by all Chileans and their government in the future.

Social unsustainability: 

From a social perspective: almost 30% of the country's population live in a situation of poverty - that is 4 million Chileans, of whom 1 million are completely indigent. Unjust distribution of income, which began during the military dictatorship, has continued without change, and according to official figures of the distribution index between 1992 and 1994, it has even gotten worse, a fact that has produced an increase in social discontent. The most serious aspects of this unequal distribution are that wages are kept low and the same labor laws that were decreed by the military government are still in effect.

The Environmental Impact of Economic Liberalization

In a trade context in which Chilean exports have increased 15 times in the last few years, almost 9 out of every 10 dollars that we export today correspond to natural resources in the form of raw materials or semi-processed materials. Of these, 44.5% come from the mining sector, 17.1% come from agriculture, 14% from forestry and 11.7% from fishing. (1995 figures)  

In 1994, more than 88% of our exports were natural resources. Of these, 55.9% were unprocessed raw materials and 32.3% materials with a low-level of processing, especially fish-meal and cellulose. 

Government and business spokespersons claim that the country is able to sustain an annual growth rate of 6 to 7%, but they are ignoring the inability of the ecosystem to continue tolerating the stress produced by the present rate of extraction, and the buildup of deposits of residues and emissions of industrial processes. To give a clear picture of this situation, it is enough to note that at present, 64.8% of Chile's exports consist of only 10 products: copper, gold, fish-meal, frozen fish, grapes, apples, raw and bleached cellulose, pine lumber and wood chips. In so far as pollution, it should be observed that there is wide scale generalized damage to the environment, and that the government has been forced to designate as saturated areas some locations where the impact of pollution on public health is serious. 

The environmental deregulation of the country, the lack of effective laws to protect the environment, weak regulations which largely go unenforced, have all had serious impact not only on the ecosystem, but also on the quality of life and health of the population. 

The Mining Sector: 

Pollution of the air, land and water is widespread in the mining sector. All the mining regions throughout the country, particularly those that produce copper, should have been declared saturated areas by the government, since their high levels of emissions have caused serious damage to the health of the population and the environment. To name a few: Chuquicamata, Paipote, Ventanas, Caletones. Among these companies, CODELCO alone should invest more than 900 million dollars to reverse the air and water pollution it is producing.

 

Forestry sector: 

To facilitate the liberalization of exports in forestry, the military government changed the legislation in this area by introducing decrees such as Decree Law 701, which subsidized forestry plantations and freed them from taxes. Decree 701 was in effect for 20 years, starting in 1974. And it was renewed by the democratic government.

 

Fishing Sector: 

Chile today is the fourth leading nation in fishing in the world. In order to facilitate this aperture, the military government deregulated fishing in 1980, by decreeing that marine resources were Res Nullius (nobody's property). Exports from Chile's fishing industry have doubled in the last 10 years (from 4,907 tons to 8,000 tons). Although it is true that the fishing industry was regulated by a new Fishing Law in 1991, the extensive pressure on marine resources has continued during the democratic government, due to lack of implementation of the rules and the lack of funding to enforce them. The greatest environmental impacts in the fishing sector are the collapse of pelagic small valved species, some of which have been declared off-limits for fishing, as well as the pollution caused by the fishing industry. In addition, in the last few years the effects of fish farming on the marine and lacustrian ecosystems have had a serious impact on tourism.

Agriculture: 

The military government promoted the deregulation of this sector and the concentration of property ownership, using various legal mechanisms such as changes in legislation regarding indigenous peoples. These reforms, in addition to subsidies to export crops, caused a decrease of the cultivation of traditional crops that did not lend themselves to trade, and almost wiped out the campesino economy.

All these issues have become very important in the arguments of the agricultural sector with the government during the negotiations for Chile's access into the free trade agreements with Canada an the Mercosur.  

The excessive pressure of the Chilean export model on natural resources (species collapse, loss of natural patrimony and biodiversity) and the use of the environment as a place to dump wastes has negative impacts on health, the quality of life of the population and on the environment itself, which are difficult and costly to reverse, and which even have negative effects on various productive sectors such as agriculture and tourism. 

The failure to consider environmental costs has contributed significantly to the economic growth of the country and its entry into the global economy, since Chilean products have been more competitive in the international market. However, it can be demonstrated that the Chilean model of economic growth and increased GDP, is unable to project this kind of growth into the future, and incapable of improving the conditions of life for the majority of its population Intensified inequality: The non distribution of growth income 

The benefits of the Chilean export model are concentrated on a few while many are excluded. This situation continues to be true today under democracy. 

In 1970, before the trade liberalization of Chile's economy took place, economic growth and the GDP were lower, but only 20% of the population were living in poverty. 

In 1990, the newly elected democratic government was handed a country where 40% of the population lived in a situation of poverty, or twice as many poor as in 1970. 

Today, after 12 years of 6% annual sustained growth, 30% of the Chilean population continues to survive at the poverty level; that is 4 million Chileans, of whom 1 million are in a situation of extreme poverty or indigence. In some regions, such as the VII and the VIII Regions, 40.5% and 40.9% of the population (respectively) are poor, even though these regions make a high contribution to the GDP. These two regions contribute 27% of the total in fishing, 12% of forestry, and 19% of manufacturing. 

Poverty in Chile does not exist because the poor do not have jobs, although between 1985 and 1990 the unemployment rate was 9.5%, it dropped to 5.6% between 1990 and 1994. Official figures show that in Chile the poor have jobs, but they have low paying jobs. 

The figures of productivity per person also show that Chilean workers are not lazy or badly trained. Private businesses, such as CAP , have increased their productivity by 71% in the last 9 years, ENTEL has increased it by 116% in 7 years, and the telephone companies by 148% in 5 years. 

Economic growth in Chile is subsidized by low wages. One million households, that is 4 million Chileans, out of a total population of 13 million, have a monthly income of less than US$200, and another million households (or another 4 million persons), are on the verge of falling into this category. 

As a result, according to official figures, when the Chilean population is divided into 10 groups by income level, the richest 10% of the population receives 40.8% of the GDP, and the poorest 10% receive only 1.7%. 

This group of the poorest 10% of the population who receive 1.7% of the GDP is comprised of 1,656,000 persons who earn less than US$ 37 per month. 

Between 1992 and 1994, that is to say, during the democratic governments, income distribution has become worse, and the gap between the rich (+0.7) and the poor (-0.4) has widened. 

This all shows that the success of Chile's export model is based on low salaries, poverty and environmental destruction. Chile=92s incorporation into the global economic adventure has benefited a very few at a high cost to the majority of the population. 

The externalization of social and environmental costs has given Chile a great competitive advantage in the world marketplace. However, these same factors make long term participation an inviable alternative, even by the rules of the market. 

The aggressive criteria of the global market, government support for competition, the ability of society to adapt to and maintain competitiveness, and the attractiveness of the country to investors, set the requirements for incorporation into the globalized economy, according to the business leaders who are at the helm of this process. 

Chile has received good ratings, but, without a doubt, it has been a dark victory. The application of these criteria has destroyed the environment at the global level, and has intensified social unrest in all nations. The costs of the globalized economy for citizens and to the environment are not viable, and therefore they constitute a real limit for their future consolidation. That is why, as citizens, we must create the conditions needed to counteract the impact of economic globalization and develop strategies to reverse it. 

SOURCES:  

• Banco Central de Chile, Departamento de Cuentas Nacionales

 
• Banco Central de Chile

 
• Diario "La Segunda", Santiago, Chile, abril de 1996. 
• J. Schatan: 

 
• Ministerio de Planificación y Cooperación: Resultados Encuesta de Caracterización Socioeconómica Nacional, CASEN-1994.Santiago, Chile, 1995. 
• Ministerio de Relaciones Exteriores, Dirección General de Relaciones Económicas Internacionales,1995

 
• M.E. Rozas: 

 
• R. Quiroga y S. Hauwermeiren: 

 
• R. Quiroga y S. Hauwermeiren: 

 
• Sur: Temas Sociales n* 9, Santiago Chile, octubre de 1995. 
• Renace:

 
• Sarah Anderson y John Cavanagh