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Home > Blogs > Anthony Harrington > Can Chile follow the miracle rescue of 33 miners with a Chilean economic miracle?

Can Chile follow the miracle rescue of 33 miners with a Chilean economic miracle?

Chile miners | Can Chile follow the miracle rescue of 33 miners with a Chilean economic miracle? Anthony Harrington

As the world watched the incredible sight of Chile’s 33 miners emerging, one by one, from what might so easily have been their stony tomb half a mile underground, there was a real sense that this was also the opportunity for the country as whole to shed the darkness of the Pinochet years and to be seen as a modern, democratic country with a thriving economy.

In fact in his first interview with the BBC after the rescue, Chile’s billionaire President Sebastián Piñera said that his goal now was to make Chile the first Latin American country to defeat poverty and underdevelopment. He went on to say that from now on, to say that something was done “the Chilean way” would mean that it was done right, with team work and application.

Certainly, anyone who watched through the long hours, as miner after miner was brought to the surface after their 69 day ordeal underground, to be ecstatically greeted by family, friends and strangers alike, could not but have been impressed with the focus, dedication and complete absence of ego displayed by all concerned, and particularly by the country’s President. “Chile is not the same country that it was 69 days ago. We are more respected in the world,” he said.

Later this month (October) Piñera has the task of pushing his 2011 budget proposals through the Chilean legislature. He will be able to draw considerable strength and comfort in this process from the latest IMF report on Chile, published at the end of September, which praised the resilience of the country’s economy.

As the IMF makes clear, Chile’s financial system weathered the global financial meltdown better than most:

“Chile’s economy has withstood successfully two consecutive large negative shocks—the global financial crisis and the February 2010 earthquake. Its resilience has been underpinned by substantial macroeconomic easing, a well-capitalized banking system, and absence of imbalances in the private sector. Strong growth has resumed since the second half of 2009, and the earthquake caused only a temporary disruption in economic activity. The unemployment rate has declined and annual Consumer Price Index (CPI) inflation increased to 2.2 percent in July.

Where banks in developed countries are creaking under the weight of non-performing or dodgy loans, Chile’s banks are well capitalised and their non-performing loans are under 3% of their loan book, a position many UK banks would give their CEO’s right arm for. Chile’s central bank has even been able to unwind the special liquidity measures it put in place at the height of the downturn and its base rate moved up to a sensible 2% in August. The country ran a fiscal deficit of just 4.4% in 2009 and although the structural deficit will remain high in 2010, thanks to a very ambitious recovery programme to deal with the effects of the February earthquake, the country has seen its debt rating upgraded by Moodys. It is now A3. The IMF expects the Chilean economy to grow by 5% in 2010 and by as much as 6% in 2011 – this as Europe and the US struggle to avoid sliding back into recession or even into a deflationary spiral. There is much still to be done, but the country looks well set on the road to prosperity. It will be interesting to see if Piñera can harness the present wave of international good will towards Chile and use it to implement his bold goals.

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Tags: central bank , Chile , Chilean economy , Chilean mine rescue , IMF , Latin America , poverty , Sebastian Pinera
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