Challenges for the Chilean economy under cyclical shocks, 1999-2016

摘要

A brief summary of the evolution of economic policies and growth in Chile since 1973 is presented, distinguishing between four periods: 1973-89 with average growth of 2.9 percent, 1990-98 with 7.1 percent (notably above the 3.2 percent Latin American average), 1999-2013 with 3.9 percent, and 2014-16 with 1.9 percent, explaining the main forces underlying these sharp differences. Analysis focuses on the fiscal and external disequilibrium associated with the fiscal treatment of the copper price and the adoption of a free exchange rate since 1999. Subsequently, the focus is on the macroeconomic situation in 2013 and five sources of accumulated disequilibria that suggested a high probability of significant deceleration of the economy. The article ends with a discussion of the actual deceleration in more recent years, converging with the negative average outcome of the region, and concludes that worsening economic performance has been associated mainly with the shift from the coherent countercyclical policies of the 1990s to the procyclical opening of the capital account, liberalization of the exchange rate, and adoption of sharp inflation targeting overcoming other relevant macroeconomic targets since then.