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  1. CHILE: Economic, Political and Social Performance January 2005

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

  3. Background

  4. 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: US$10,981 • Language: Spanish Source: National Census 2002 (www.censo2002.cl); Central Bank of Chile (www.bcentral.cl); IMF (www.imf.org) *Purchasing power parity

  5. Political System

  6. Political System The Chilean State is divided into three clearly differentiated and independent powers: • The Executive, headed by the country’s 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

  7. 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 • Chile’s current President is Ricardo Lagos, a member of the Concertación de Partidos por la Democracia, a center-left coalition

  8. 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

  9. 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 Chile’s 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

  10. 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

  11. Economic Performance

  12. Electricity, gas & water Personal services 3.1% Construction 11.5% 8.4% Transport & telecommunications Home ownership 7.8% 8.4% Agriculture & forestry Financial and 4.7% Fishing business services 1.4% 13.5% Retail, restaurants & hotels 11.5% Mining Public administration 8.6% Manufacturing 3.9% 17.1% GDP by Sector, 2003 (%) Source: Central Bank of Chile (www.bcentral.cl) In 2003, GDP totaled US$71.4 billion, or US$154.7 billion in PPP

  13. 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 Pillars of Chile’s Economic Strategy

  14. Gross Domestic Product (GDP) Source: Central Bank of Chile (thousands of 1996 pesos), 1996-2003, www.bcentral.cl.

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

  16. (e) Fiscal Surplus / Deficit (% of GDP) Source: Central Bank of Chile , 1994 – 2003 (www.bcentral.cl)

  17. Evolution of Inflation in Chile (%) Source: Central Bank of Chile , 1994 – 2004 (www.bcentral.cl),

  18. Unemployment Rate (%) Source: National Statistics Bureau, INE, 1996-2003 (www.ine.cl). International Monetary Fund, 2004-2005 (www.imf.org)

  19. Sovereign Spreads

  20. Competitiveness Ranking Source: World Economic Forum, 2004 – 2005 (www.weforum.org)

  21. Index of Economic Freedom Source: Heritage Foundation, 2005. Top 20 positions. (www.heritage.org)

  22. Transparency Source: Transparency International, 2003 (www.transparency.org)

  23. Business Climate Source: Economist Inteligence Unit, 2004-2008 (www.eiu.com)

  24. International Integration

  25. InternationalIntegration Trade Policy • Unilateral • Multilateral • Bilateral and Regional Foreign Investment

  26. International IntegrationUnilateral Trade Policy • A flat-rate import tariff of 6% • Procedures for foreign trade that are simple, transparent and permanently being modernized Chile’s Flat-Rate Import Duty

  27. 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

  28. 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

  29. 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 country’s population), representing a GDP of US$ 22,149,200 million, equivalent to 270 times Chile’s annual output • In addition, 74% of Chile’s foreign trade (exports + imports) is covered by tariff reduction programs • Chile’s extensive network of trade agreements puts it in a privileged position to serve as a platform from which to access this large potential market

  30. Chile’s Foreign Trade1991-2003 (US$ million) Source: Central Bank of Chile, 1991-2003 (www.bcentral.cl)

  31. Exports of Goods Source: Central Bank of Chile, 2003 (www.bcentral.cl)

  32. 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)

  33. (Jan-Oct) 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

  34. Materialized Foreign Investment by Country of Origin Source: Foreign Investment Committee, 1974-2003, (www.doingbusinessinchile.cl)

  35. Foreign Investment by Sector Source: Foreign Investment Committee, 1974-2003 (www.doingbusinessinchile.cl)

  36. Chile, A Platform for New Markets • Chile’s 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

  37. Equality and Social Cohesion

  38. 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

  39. 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)

  40. Increased Educational Coverage

  41. Healthcare • Chile’s 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 country’s citizens have timely and effective access to medical care, independently of their financial situation, gender or age

  42. 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

  43. Chile Solidario • This program aims to lift the country’s 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

  44. ResultsBetter living standards (% of population)

  45. ResultsReduction of Poverty(% of population)

  46. Thank you very much