PCDForum Column #79 Release Date June 1, 1996

by Sara Larrain R.

A recent survey of 2,465 international business leaders conducted by the
International Institute of Business Development declared the Chilean economy the
most competitive in Latin America and the fifteenth most competitive in the
world. The ranking was based on four criteria: government commitment to open
markets, the ability of the society to adapt to the demands of global
competition, aggressiveness in world markets, and government policies favorable
to foreign investors.

Indeed, the Chilean economy has maintained a 6 percent annual growth rate
for the last 12 years and achieved a fifteen fold increase in exports-a
remarkable record. Mainstream economists attribute this economic miracle to
Chile’s shift from a closed industrial system centered on an internal, regulated
and protected market, to an export-led growth strategy based on exporting raw
materials, privatization, deregulation, and integration into the global economy.
Unfortunately these economists fail to ask a basic question: "Who benefits?"

If they were to delve a bit further into the Chilean experience they would
find that Chile’s success has been purchased at a high price-depressing wages,
suppressing labor unions, bearing the health burdens of terrible pollution, and
turning a blind eye to the long-term consequences of the unsustainable
extraction of Chile’s natural resources-both renewable and nonrenewable. Many of
us are now pointing out that success based on such short-sighted practices is
inherently unsustainable.

While visitors are often impressed by the evident prosperity of Santiago’s
spreading upper and middle class suburbs, those who look behind this facade find
that 4 million Chileans, 30 percent of the population, live in poverty. One
million of these live in absolute destitution. Income inequality has been
increasing since the beginning of the military dictatorship, and continues to
worsen. Especially troubling is the fact that nine out of every ten dollars in
export earnings comes from the export of raw or semi-processed materials. Of
these exports, 45 percent come from the mining sector, 17 percent from
agriculture, 14 percent from forestry and 12 percent from fishing. Sixty-five
percent of Chile’s exports consist of only ten products: copper, gold,
fish-meal, frozen fish, grapes, apples, raw and bleached cellulose, pine lumber
and wood chips. Pollution has become so damaging to health in some areas that
the government has designated them "pollution saturated." The
environmental damage of mining operations is especially severe, but both
government and the companies plead they are too poor to do anything about it.
There is no legislation providing for the restoration of mined lands once the
mines are closed.

Heavily subsidized forestry sector exports increased from $130 million
dollars in 1974 to $2,040 million dollars in 1995. Only 4 percent of the
subsidies went to small tree farmers. A study by the Central Bank of Chile
estimates that at current rates of extraction Chile’s native forests will have
disappeared by the year 2025, just 30 years in the future.

Policies favoring concentration of land ownership have combined with export
crop subsidies to nearly wipe out the campesino farming economy.
Increasingly farming is in the hands of large, often foreign owned,
corporations. It is estimated that during the next few years an additional 100
to 200 thousand farming families will be forced to abandon the countryside for
the city. In the last 10 years the use of insecticides has increased by 64
percent and that of weed killers by 221 percent. One hundred and thirty
agricultural chemicals in use in Chile are black-listed by the United Nations as
excessively dangerous to health. Hospital records reveal alarming increases in
miscarriages and genetic malformations in some rural areas. Today, 45 percent of
the agricultural soil in Chile is eroded.

In every sector the success of Chile’s export model is based on
externalizing social and environmental costs. We are making a few people very
wealthy by exporting our natural wealth and trashing our eco-system. While this
has given Chile a great competitive advantage in the world marketplace, it has
been at a high cost to the majority of people. Furthermore, the success factors
on which it is based cannot be sustained in the long run.

In terms of what World Bank economists choose to measure Chile may look like
a miracle. However, to most people who look behind the facade it has been a dark
victory. That is why, as citizens, we must reverse the process of integrating
ourselves into the global economy and concentrate instead on restoring the
integrity of our local economies and ecosystems.

Sara Larrain R. is coordinator of the Chilean Ecological
Action Network (RENACE), Ecocentro, Seminario 774, Ñuñoa, Casilla
16784 Coreo 9. Santiago, Chile, phone (56-2) 223-4483; fax (56-2) 223-8909;
Internet: iep@ax.apc.org and a contributing editor of the PCDForum. This column
was prepared and distributed by the PCDForum based on her presentation to the
Global Teach-In 2 of the International Forum on Globalization, Washington, D.C.,
May 11, 1996.

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