Friday, September 02, 2005

economics and politics

                                  
Chile is moving toward its next presidential election on december  11th  like  a mature democracy. The  economics scenario is quite promising even though  oil prices increases are a  threat which to count on. Sure ,the copper prices are  at the highest level in  years(since 1988),and the expectation is that high prices  will continue  at least for the next year. Private investment this year  is  growing strong at a 27% annual rate , domestic demand also is surging at an annual rate of 9.8%,and inflation is  on line with Autonomous Central  Bank projections according with its recent monetary report(www.bancocentral.cl) September 2005). So, the Chilean economy looks pretty well for investors looking for opportunities  abroad . Corruptions level are low ,the country ranked 18th on the organization’s corruption index in 2001 (with the U.S. ranking 16th). On the same index, Chile ranked first among Latin American countries.and  there is a climate of political and social stability which is in a sharp contrast with the reality in other Latin American countries. Recently in a forum  organized by The newspaper “La Nación”  in Buenos Aires , Argentina, (www.lanacion.com.arg) the Chilean economy  was called the “Boutique economy”,  suggesting a selective list of investment opportunities. The aggregate cost tough, both in the seventies and eighties, has been high enough to create strong incentives to keep the pace of growth  with stability .
The next Presidential election, to be held on December 11th,is on schedule like  a political  event which goes on  without interfering  the economy. The IMF(www.imf.org)  in its recent report (September 2005),says : “Political consensus in Chile on the macroeconomic framework remains very strong. All the main candidates have reaffirmed their commitment to fiscal prudence, inflation targeting, and trade openness”.
In  a recent  business polls, only 9% of those who were interviewed ,responded that they were postponing  investment decisions because of political  uncertainties, the other 91 % are looking for  new business opportunities creates by Chilean  economic growth, expected to be between 6 - 6.5 % this year ,and 5 ¼   -6 ¼ for 2006.
This situation is rather unusual for the standard  in Latin America, where there is still a debate between  different approaches to the economy concerning for instance to the role of State ,the law, the markets and regulations to private  firms. Chile has evolved to a moderate political path based on consensus, and the rule of law  . This does not mean a static society, but one which moves forward based on a sort of an implicit contract between  voters and elected government officials .So far, it looks like this contract has  worked  out properly. Most opinions polls ,show that the probability of a second  center left government, following actual President Lagos´s government  is  high, and quite on the contrary to what  someone can expect,.  center left in Chile actually   mean a market orientation economy.-

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