Analysts Note Successful Transformations in Chile
Analysts Note Successful Transformations in Chile
Lima, Peru, 21 August 2008
Independent analysts consider Chile a "showcase of successful transformations."
In spite of major political transformations, they explain, governments have established a consistent macro-economic stability. According to their report:
"Adoption of a rules-based approach to fiscal policy, inflation targeting and a floating exchange rate regime have placed Chile at the forefront of maintaining price stability in Latin America. Because Chile's fiscal rules, legislate for 'above normal' mineral revenues to be sequestered in foreign exchange assets, Chile has also been very successful in avoiding a 'Dutch disease' problem during the current boom in mineral prices. As a consequence, while minerals dominate export values, the non-mineral traded sector has continued to thrive."
These observations come after a review of Chile's Individual Action Plan (IAP) before APEC Senior Officials. Each of APEC's 21 member economies is required to undergo periodic analysis of its progress in realising the Bogor goals (free and open trade and investment by 2010 for developed economies and 2020 for developing economies).
Chile has stated its intent to eliminate tariffs on most imports by 2010 - the target set for developing economies. The review team calls Chile an "early achiever in privatisation, sectoral liberalisation and establishing strong institutions for pursuing regulatory reform. "The Bogor goals," they say, are "well within reach."
Chile has been at the forefront in the regional trend in free trade agreements. To date, its agreements include 55 trading partners which account for over 85 per cent of its total trade. As a consequence, a large component of its international trade and foreign investment is affected by FTA/RTA-determined rules and regimes.
Because Chile established its bilateral and regional trade agreements with a base of a liberal, open and transparent MFN trade and investment regime, the risks of trade and investment diversion are relatively low. With multilateral negotiations at a standstill, this strategy has given credibility to Chile's commitment to open trade and investment, binding the economy to its own legal agreements. In addition, it is clear that Chile has been seeking to align its approach to trade agreements with good practice as reflected in APEC's model measures for trade agreements.
And this, say analysts, is evidence that it is possible for APEC's developing economy members to put in place the strong institutions that some of the more complex reforms require.
Analysts' full report will be available online after the Senior Officials' Meeting on 23 August 2008: http://www.apec.org/redirect/2008_iap_chile.html