The Remarkable Story of Chile's Economic Renaissance

[Valin]

CATO:

 

Daniel J. Mitchell and Julia Morriss

7/18/12

 

Thirty years ago, Chile was a basket case. A socialist government in the 1970s had crippled the economy and destabilized society, leading to civil unrest and a military coup. Given the dismal situation, it's no surprise that Chile's economy was moribund and other Latin American countries, such as Mexico, Venezuela, and Argentina, had about twice as much per-capita economic output.

 

Today, by contrast, Chile has passed Argentina to become the richest nation in all of Latin America. For three decades, it has been the fastest-growing economy in the region. Poverty has fallen dramatically, and living standards have soared.

 

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Pension reform is the best-known economic reform in Chile. Ever since the early 1980s, workers have been allowed to put 10 percent of their income into a personal retirement account. This system, implemented by José Piñera, has been remarkably successful, reducing the burden of taxes and spending and increasing saving and investment, while also producing a 50-100 percent increase in retirement benefits. Chile is now a nation of capitalists.

 

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