CHILE:

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CHILE

• Economic, Political and Social Performance
• January 2005

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Contents

• Background
• Political System
• Economic Performance
• International Integration
• Equality and Social Cohesion

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• Background

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Basic Facts

• Population 15.6 million
• Population growth rate 1.2
• Population density 20.1 inhabitants / km2
• Life expectancy 76.7 years
• Per capita income (nominal) 2005 US 5,741
• Per capita income (at PPP) 2005 US10,981
• Language Spanish

Source National Census 2002 (www.censo2002.cl)
Central Bank of Chile (www.bcentral.cl) IMF
(www.imf.org) Purchasing power parity

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• Political System

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Political System
The Chilean State is divided into three clearly
differentiated and independent powers

• The Executive, headed by the countrys highest
  authority, the President of the Republic
• The Judiciary, within which the highest court is
  the Supreme Court
• The Legislature, comprising the House of Deputies
  and the Senate

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Political SystemExecutive Branch

• Chile has a presidential system of government in
  which Executive authority is held by the
  President, who acts as Head of State and Head of
  Government
• The President holds office for six years and
  cannot be re-elected for a second consecutive
  term
• There are 18 ministries
• Chiles current President is Ricardo Lagos, a
  member of the Concertación de Partidos por la
  Democracia, a center-left coalition

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Political SystemLegislative Branch

• The Legislative Branch is represented by the
  National Congress, comprising the House of
  Deputies (120 members) and the Senate (49
  members), with legislative and supervisory powers

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Political SystemJudicial Branch

• The Judiciary is independent of the other powers
  of state. The highest court is the Supreme Court,
  with 21 members who, each three years, elect
  their President. In addition, there are Appeals
  Courts and Civil and Military Courts
• A far-reaching reform of Chiles system of
  justice was launched in 2000. This reform -the
  first structural modification of the system since
  the mid-19th century- aims to increase access to
  justice and to reduce trial times, as well as
  strengthening personal and civil liberties

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Political SystemMain Characteristics

• Democratic institutions that function properly
  total respect for civil and human rights
• Firmly-rooted political stability, with strong
  institutions and a high level of transparency
• An independent and efficient Judicial System
• Modernization of the State underway through
  reforms that increase the efficiency of the
  public administration and ensure transparent
  government

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• Economic Performance

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GDP by Sector, 2003 ()

• Source Central Bank of Chile (www.bcentral.cl)

In 2003, GDP totaled US71.4 billion,
or US154.7 billion in PPP

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Pillars of Chiles Economic Strategy

• Macroeconomic stability
• Full operation of markets, accompanied by the
  regulation required to ensure their efficiency
• Openness to trade and international investment
• Wide range of social policies to promote equality
  and social cohesion

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Gross Domestic Product (GDP)

• Source Central Bank of Chile
  (thousands of 1996 pesos), 1996-2003,
  www.bcentral.cl.

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GDP Average Annual Growth Rate (Selected
Countries)
Source International Monetary Fund, 1990 2004
(www.imf.org)

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Fiscal Surplus / Deficit ( of GDP)
Source Central Bank of Chile , 1994 2003
(www.bcentral.cl)

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Evolution of Inflation in Chile ()

• Source Central Bank of Chile , 1994 2004
  (www.bcentral.cl),

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Unemployment Rate ()

• Source National Statistics Bureau, INE,
  1996-2003 (www.ine.cl). International Monetary
  Fund, 2004-2005 (www.imf.org)

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External Debt
Source Global Development Finance 2004. World
Bank
External debt in developing countries / GNI.
Multilateral, bilateral and private. 2002.

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Sovereign Spreads

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Competitiveness Ranking

• Source World Economic Forum,
  2004 2005 (www.weforum.org)

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Index of Economic Freedom

• Source Heritage Foundation,
  2005. Top 20 positions. (www.heritage.org)

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Transparency

• Source Transparency
  International, 2003 (www.transparency.org)

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Business Climate

• Source Economist
  Inteligence Unit, 2004-2008 (www.eiu.com)

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• International
• Integration

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InternationalIntegration

• Trade Policy
• Unilateral
• Multilateral
• Bilateral and Regional
• Foreign Investment

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International IntegrationUnilateral Trade Policy

• A flat-rate import tariff of 6
• Procedures for foreign trade that are simple,
  transparent and permanently being modernized

Chiles Flat-Rate Import Duty

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International IntegrationMultilateral Trade
Policy

• Chile participates actively in the multilateral
  trading system and was a founding member of GATT
  and the WTO
• Multilateral trade agreements are integrated into
  Chilean legislation and have legal status

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International IntegrationBilateral and Regional
Trade Policy

• Agreements in force
• ECAs with Mercosur and the Andean Community
  countries
• FTAs with Canada, Mexico, Central America, the
  European Union, South Korea, the United States
  and EFTA
• Agreements under negotiation
• FTAA, New Zealand-Singapore (P3), India, and
  China
• Preliminary study for a possible agreement with
  Japan
• Other fora APEC, Observer status at the OECD

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International IntegrationBilateral and Regional
Trade Policy

• The international insertion achieved through
  bilateral trade negotiations means that companies
  based in Chile have preferential access to a
  potential market of 1.2 billion consumers (80
  times the countrys population), representing a
  GDP of US 22,149,200 million, equivalent to 270
  times Chiles annual output
• In addition, 74 of Chiles foreign trade
  (exports imports) is covered by tariff
  reduction programs
• Chiles extensive network of trade agreements
  puts it in a privileged position to serve as a
  platform from which to access this large
  potential market

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Chiles Foreign Trade 1991-2003 (US million)

• Source Central Bank of Chile, 1991-2003
  (www.bcentral.cl)

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Exports of Goods

• Source Central
  Bank of Chile, 2003 (www.bcentral.cl)

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Exports of Goods by Market, 2003

• Exports that are ever more diversified
•   6,024 companies (up from 200 in 1975) export
  3,854 products (200 in 1975) to 165 countries (50
  in 1975)

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Advantages for Investors

• Sustained growth
• Controlled inflation
• Balanced fiscal accounts
• Low level of foreign public debt
• Extremely low country risk, reaching an historic
  minimum of 61 basis points over US Treasuries
  (Source JP Morgan, January 3, 2005

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Foreign Investment

• More than 3,000 companies from 60 countries have
  invested over US 64 billion in Chile. Between
  1996 and 2003, annual foreign investment averaged
  7.3 of GDP

Nominal US billion
Includes DL600, Chapters XIV and XIX
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Materialized Foreign Investment by Country of
Origin

• Source Foreign Investment Committee, 1974-2003,
  (www.doingbusinessinchile.cl)

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Foreign Investment by Sector

• Source Foreign Investment
  Committee, 1974-2003 (www.doingbusinessinchile.cl)
  

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Chile, A Platform for New Markets

• Chiles Investment Platform Law (Law Nº 19.840)
  allows foreign investors to set up companies as a
  vehicle for investments in other countries,
  without being liable to Chilean taxation on
  returns from these investments
• By mid-2004, around 40 multinational companies
  with a leading position in international markets
  had selected Chile as a location for call
  centers, technological support centers, back and
  front office operations, shared services centers,
  software development, and regional headquarters

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• Equality and Social Cohesion

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Social Concerns

• Along with economic growth and modernization,
  Chile has also achieved important progress in
  building a country of greater fairness,
  solidarity, and equality of opportunity
• This has been achieved through an extensive and
  efficient social protection network
• Since 1990, improved access and greater
  efficiency in educational and healthcare programs
  have been key priorities for the government,
  along with programs to combat poverty

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Education

• Public expenditure on education increased from
  2.4 of GDP in 1990 to 4.3 in 2002 and this has,
  among other advances, allowed Chile to
• double the number of young people receiving
  secondary education
• triple the number of university students
• start introducing a full school day in state
  schools as from 1997 (a process that the
  government aims to complete in 2006)

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Increased Educational Coverage
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Healthcare

• Chiles healthcare system combines an integrated
  public system with a private insurer/provider
  system created in 1981, and both the State and
  the private sector participate in providing
  insurance and healthcare services
• Public health expenditure represented 2.9 of GDP
  in 2002, up from 1.9 in 1990
• In 2004, a new universal health insurance plan
  -known as Plan Auge- was launched in a bid to
  ensure that all the countrys citizens have
  timely and effective access to medical care,
  independently of their financial situation,
  gender or age

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Employment

• Free-choice pension and health insurance
• Minimum wage established by law
• Introduction in 2002 of an unemployment insurance
  scheme, providing basic coverage for five months
• Reduction of the legal working week from 48 to 45
  hours as from January 2005

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Chile Solidario

• This program aims to lift the countrys 225,000
  poorest families out of extreme poverty by 2005
• It provides integral support to these families by
  creating a network of public services and
  programs that are tailored to their needs it
  seeks to insert them in this national, regional
  and local network and to ensure that they access
  all the direct financial benefits to which they
  are entitled under the program

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ResultsBetter living standards ( of population)
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ResultsReduction of Poverty ( of population)
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Thank you very much