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 campaign.

... 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 lands.

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 small farmers.

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 same process.

Views from the South

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