Ludwig von Mises Institute

Chile

From Mises Wiki, the global repository of classical-liberal thought
Jump to: navigation, search
Country summary

Capital

Santiago

Borders

Argentina 5,308 km, Bolivia 860 km, Peru 171 km

Government type

republic

Population

16,601,707 (July 2010 est.)[1]

Population growth

0.881% (2010 est.)[1]

Life expectancy

77.34 years[1]

Unemployment

9.6% (2009 est.)[1]

Index of Economic Freedom

10[2]

Corruption Perceptions Index

25[3]

Doing Business ranking

49[4]


Prior to the coming of the Spanish in the 16th century, northern Chile was under Inca rule while the indigenous Mapuche inhabited central and southern Chile. Although Chile declared its independence in 1810, decisive victory over the Spanish was not achieved until 1818. In the War of the Pacific (1879-83), Chile defeated Peru and Bolivia and won its present northern regions. It was not until the 1880s that the Mapuche Indians were completely subjugated. After a series of elected governments, a three-year-old Marxist government of Salvador ALLENDE was overthrown in 1973 by a military coup led by Augusto PINOCHET, who ruled until a freely elected president was installed in 1990. Sound economic policies, maintained consistently since the 1980s, have contributed to steady growth, reduced poverty rates by over half, and have helped secure the country's commitment to democratic and representative government. Chile has increasingly assumed regional and international leadership roles befitting its status as a stable, democratic nation.[1]

Economical characteristics[edit]

  • Currency: Peso (ISO code: CLP)
  • Central bank discount rate: 8.25% (31 December 2008)[1]
  • Commercial banks lending rate: 13.26% (31 December 2008)[1]
  • Stock of money (M1): $14.72 billion (31 December 2008)[1]
  • Quasi money (with M1 makes M2): $73.66 billion (31 December 2008)[1]

Notable events:[edit]

  • Banking crisis: July 1898, 1907, 1976, 1980[5]
  • Public default: 1826-1842, 1880-1883, 1931-1947, 1961, 1963, 1965, 1972, 1974-1975, 1983-1990 (external)
  • Years in inflation: 20.3% (share of years 1818-2009 with annual inflation above 20 per cent per annum)[6]

Inflation in Chile, 1878-1914[edit]

Chile was a strongly export-oriented country, and badly hit in 1878 by an economic crisis in Europe. The banks were not able to redeem their banknotes for hard money, so the state suspended redemption and gave the notes a fixed exchange rate. In the next year, a war broke out with Bolivia and Peru (1879-1884) and Chile began to issue its own banknotes. Despite winning the war, their value against the golden Peso contined to fall; by 1886 to almost a half of the pre-war exchange rate. The unstable economic conditions and speculation led to an attempt to return to the old silver currency - foiled by the civil war in 1891. The currency fell even further. To stop the inflation, a change to gold was proposed, used then in almost all of Europe. A limit on the number of issued banknotes was made law and the state's treasury was used to cover this money. A large amount of gold (in value of $37.8 million) and silver coins ($8 million) were minted.

Even then, the economic conditions remained troublesome. A weakening of the export and mining industry coincided with bad harvests. In 1898, due to the threat of a war with Argentina, a bank run has found the banks unprepared. To avoid a collapse of the economy, the state took over the banks' banknotes. (However, they were lent to the banks at a 2% rate, and so they kept an indirect influence on the issue of banknotes.)

To prepare for the war, the president was authorized to issue further $50 millions of paper money. As a result of the new wave of inflation, the gold coins, kept at par with the paper money, have vanished from circulation and 'left the country' (see Gresham's Law). The convertibility of the paper money to gold was repealed. The monetary conditions did not recover until the increase in exports and economic recovery associated with the First World War.[7]

Statistics[edit]

Statistic / Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
GDP (million USD)[8] 72 995 75 211 68 568 67 265 73 990 95 653 118 250 146 773 163 878 169 458
Govt. debt (% of GDP)[9]
Govt. revenue (% of GDP)[10] 21.626 21.734 21.084 20.687 22.004 23.785 25.775 27.486 25.977
Govt. expenses (% of GDP)[11] 20.953 20.920 20.998 19.995 18.861 18.149 16.997 17.285 19.677
Debt to revenue (years)

References[edit]

Note: statistical data was rounded. Different sources may use different methodologies for their estimates. Debt to revenue is calculated by dividing the two variables from their original ('unrounded') values. It represents how long it would a government take to repay its entire debt if it used its whole revenue for this purpose.

  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 CIA - The World Factbook. "Chile", from The World Factbook. Referenced 2010-09-28.
  2. Heritage Foundation. "Chile", Economic Freedom Score. A lower ranking is better; but please be careful when comparing between different countries or years. Referenced 2010-09-28.
  3. Transparency International. "Chile", Corruption Perceptions Index 2009. A lower ranking is better; but please note that the numbers cannot be compared between countries or years due to different methodology. Referenced 2010-09-28.
  4. Doing Business. "Chile", Doing Business 2010 (part of The World Bank Group). A lower ranking is better; but please be careful when comparing between different countries or years. Referenced 2010-09-28.
  5. Carmen M. Reinhart and Kenneth S. Rogoff. "This Time is Different", Princeton University Press, ISBN 978-0-691-14216-6, p. 356-357. (The list does not claim to be complete.) Referenced 2011-07-19.
  6. Carmen M. Reinhart. "This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises" (pdf), March 3, 2010, p. 31. (The list does not claim to be complete.) Referenced 2011-07-19.
  7. Richard Gaettens. Geschichte der Inflationen Von Altertum bis zum Gegenwart (German: History of Inflations from Old Ages to the Present), Chile, p. 227-229. ISBN: ISBN 3-87045-211-0. Referenced 2010-11-18.
  8. World Bank. "Chile: GDP", from World Bank Data. Referenced 2010-09-28.
  9. World Bank. "Chile: government debt", from World Bank Data. Referenced 2010-09-28.
  10. World Bank. "Chile: government revenue", from World Bank Data. Referenced 2010-09-28.
  11. World Bank. "Chile: government expenses", from World Bank Data. Referenced 2010-09-28.

Links[edit]

Personal tools

Namespaces

Variants

Actions

Navigation
Tools
Print/export