The Case of Chile:
Dictatorship and Neoliberalism
by Sara Larrain
excerpted from the book
Views from the South:
The effects of globalization
and the WTO on the Third World
edited by Sarah Anderson
Sarah Larrain is a former professor at the Catholic University
of Chile, and is the coordinator of the Chilean Ecological Action
Network. She is also co-founder of a new Chilean political party,
the Partido Alternative de Cambio, and stood for the presidency
of Chile in the 1999 elections. She was the principal author of
a study, Sustainable Chile, that became the platform for her election
... The bloody coup in Chile in 1973 put in place a military
government that was not trained to govern or administrate a country.
Thus, it handed over these responsibilities to the business community,
which, of course, had supported the coup. Following the guidance
of corporations, the Chilean government began to redesign laws
governing the economy and society. In addition, they began to
redesign our constitution. The one they adopted in 1980 allowed
corporations wide-ranging freedoms, based on the argument that
this would lead to economic growth and political stability.
Another motivation for opening up the economy to foreign investment
and for promoting exports was to try to regain international acceptance.
After the coup, Chile was shunned by much of the international
community because of the widespread human rights violations carried
out by the junta.
Over time, Chile did indeed become the "Latin American
tiger," with economic growth of 6 to 7 percent annually during
the last 13 years. However, the competitiveness of the Chilean
economy was based on natural resource exports, low wages, and
unequal wealth distribution...
The military government changed both the mining code and the
water code to attract foreign investment. One of these changes,
Decree 600, stimulated large investments at the expense of the
local communities and allowed companies to obtain water rights.
These have led to a reduction in agricultural activities in some
communities; many small farmers have been forced to abandon their
To promote exports in the forest sector, the government introduced
legislation like Decree 701, which subsidized between 75 to 90
percent of forest company costs, and freed the companies from
taxes. This mechanism encouraged the big companies to substitute
native forest with pine and eucalyptus and channeled 96 percent
of the subsidies to the big farmers; only 4 percent has gone to
As a result of these policies, Chilean exports in forest products
increased 1,600 percent. According to our Central Bank, if present
forest policies remain, native forests in Chile could disappear
by the year 2025.
Similar policies to encourage increased exports have been
imposed on the fishery and agricultural sectors. Today 90 percent
of [Chile's] exports are natural resource products. To give a
picture of the pressure this places on the environment, it's important
to know that just 10 natural resource products make up 64 percent
of Chilean exports. So the pressure on the environment is very
focused, and of course it is this exploitation of our environment
that has fueled our high economic growth rate.
This high growth rate has also had tremendous social costs.
Our poverty rate grew from 20 percent of the population in 1970
to 40 percent in 1985. Today, after 13 years of 6 to 7 percent
annual growth, almost 30 percent of the Chilean population (about
4 million people) still struggles at the poverty level. And poverty
today is not because of the lack of jobs, since the unemployment
rate is only 5 to 6 percent. The poor have jobs, but they have
very low-paying jobs.
It's very clear that economic growth in Chile has been subsidized
by low wages. This is continuing even now because after seven
years of a transition to democracy, we are burdened with the same
labor laws as were set in place by the companies during the dictatorship.
Workers have no right to collective bargaining or to fight for
higher pay. The final result is a very unequal distribution of
income. Some 10 percent of Chile's population earn about 60 percent
of the income, while the poorest 10 percent obtain only 1.7 percent.
Sadly, in this kind of neoliberal export-oriented economic model,
the income distribution is bad whether it's run by a dictatorship
or a democracy. The income gap has continued to get worse during
the period 1994 to 1996.
(In conclusion, I need to say that [Chile] is still making
legislative changes designed to further promote our global competitiveness
at the expense of the environment and society as a whole. For
example, they are continuing to privatize the health system and
the social funds, including the pension funds. This means that
all areas in the country need to function as corporate departments,
thus generating profits in all the different economic sectors.
So the real problem here is that we have developed a corporate
state with no concept of a social contract, and this doesn't really
change with democracy. Trade liberalization, the free market,
and the free society-these are all about having access to Coca-Cola,
but not access to wealth, pensions, health care, or education.
This is the case of Chile, and I think that many countries have
their own similar story, with different characteristics but the
from the South