Instituto Coordenadas: Populism Tendency Endangers Chile's Economic and Social Growth

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Oct 24, 2019, 15:39 ET

MADRID, Oct. 24, 2019 /PRNewswire/ -- The politics developed by the last governments of Chile have been very influenced by social conflicts that have appeared and the strategic decisions that have been taken have been more focused on solving these short-term problems than to improve competitiveness, the integration of Chilean economy in the global economy, structural reforms and the reduction of social inequalities

The disorders that are being registered have achieved a change in the public policies, giving impulse to a centrifugation to the extremes of populist-sort. This suggests that the economic consensus that has existed in Chile since the end of the dictatorship, which has allowed a sustained growth of the country with the most relevant social improvements, has come to an end. Right now, there is a high risk that the transfer of populism could compromise the future development of Chile. These are the main conclusions of the analysis that the Governance Coordinates and Applied Economics Institute (Instituto Coordenadas de Gobernanza y Economía Aplicada) has conducted about the recent social and economic situation in Chile and its future outlook.

Chile's economic model has been a growth, reduction of poverty and inequality benchmark throughout the Latin American continent. In a sea of economic and social complexities in the Southern Cone, Chile stood out as an island that had been capable of creating a system that isolated it from these problems and guaranteed its growth. However, in the lasts years, especially since the 2008 global crisis, and as a result of the political and social atomization, there is a very evident change in economic policies that have allowed Chile to lose positions and competitiveness and create less confidence in international markets that a decade ago, says the Institute's analysis.

In the last decade the pace of growth of the Chilean economy has slowed and, what is more serious, according to the predictions of the most important international organisms, Chile's future growth capacity has been curbed. The reason that explains this change is because the priorities of the political agenda have been marked during that time by the requests derived from the debates and social conflicts that have arisen, without attending to the institutionality or to the structural reforms that the times demand. According to the Institute's analysis, the requests of a policy and the discipline of a strategy focused on achieving a common objective of growth and convergence in income have been put aside. This objective was assumed by consensus by Chilean society since the presidency of Mr. Patricio Aylwin.

Instead of consolidating their singularity and their growth-own model, the Chilean economy and politics have been getting closer to the surrounding countries, losing, to a large extent, their most past distinctive features and the keys to their future viability. All this is translating into severe risk of contraction of foreign investment; in the relaxation of tax discipline, with the consequent reductions in credit ratings and lower international credibility. The labor market has become stronger and labor costs have skyrocketed, which, as is well known in Spain, generates systemic unemployment. The Chilean political landscape is generating all kinds of difficulties and delays for the implementation of the necessary reforms to diversify the export pattern, increase competitiveness, reduce bureaucracy and barriers to entry in some sectors, explains the Institute's analysis. A political and social landscape that has caused Chile to lose positions in the "Doing Business" and "Global Competitiveness Report" reports, which also reflect how other countries have overtaken it in the last decade.

In the nearest future, it is necessary to improve the training and workers' adaptation capacity to new technologies; increase country's attractiveness and obtain a more flexible economy in order to attract more investment. The executive vice president of the Governance Coordinates and Applied Economics Institute says claims that "losing mid and long term perspective; forgetting taxing and budgeting discipline and transferring to the immediate populist requests, is a no-future way that a society like Chilean, which has proved its capabilities to generate growth, employment, social improvements and wealth, can not afford to escape populism surrounding. Chile is another thing".

Jesús Sánchez Lambás, Executive Vice President of the Coordinates Institute says that "losing the perspective of the medium and long term; forgetting the budgetary and fiscal discipline and yielding to the demands of the immediate populist, is a path without a future that a society like Chile, which has determined its capabilities to generate growth, employment, social improvements and wealth, cannot afford to escape to the surrounding populism. Chile is something else".

For more information: www.institutocoordenadas.com

SOURCE Instituto Coordenadas