Chile's Economy: Inequality, Poverty, and Trade Agreements

Social Indicators in Chile

One of the key social indicators is life expectancy. In Chile, it is among the highest in Latin America, with women at 80.8 years and men at 74.8 years. The literacy rate is 95.8%, and the mortality rate is 7.8%.

Economic Inequality in Chile

Chile's economy has a major flaw: the unequal distribution of income among the population. In 2005, Chile ranked 113th in income equality. The bottom 15 countries reveal a significant gap that has not yet been remedied. Some attribute this gap to the liberal system, while others attribute it to the endowment of natural factors, characteristic of an extractive economy.

The inequality between men and women, coupled with the low labor participation of women, hinders the reduction of employment and wage differences. With 16 million inhabitants, Chile is the 6th largest country in Latin America.

Income Distribution and Poverty

Poverty is measured by the CASEN survey, which assesses socioeconomic characteristics. It refers to the percentage of the population or households that are below the poverty line or the indigence line (income needed to purchase a basic food basket).

Types of Poverty

• Extreme Poverty: Reflects the percentage of the population living on less than $1 or $2 per day.
• Border Poverty: Equivalent to the percentage of people with incomes below 50% of the median income.

Measuring Inequality

Inequality is measured by the Gini index. Inequality in Chile dates back to the colonial era when an extractive economy and agricultural activity developed on estates emerged.

In the 20th century, inequality indicators fell due to improvements in education and intervention in the redistributive economy. The highest levels of inequality were observed during the Pinochet dictatorship.

In 1990, with the arrival of democracy, social programs were developed to eradicate poverty and reduce inequality. However, the indicators do not show whether there is social mobility. While Chile has managed to reduce poverty by more than half, the results are mixed. The gap between the richest quintile and the poorest has not narrowed, nor has it increased.

Neoliberalism in Chile

Neoliberalism is a political theory that tends to minimize state interference. The market is responsible for regulating economic transactions.

Implementation of the Neoliberal Model

The neoliberal model was implemented in Chile between 1973 and 1981 under the military government to restore the economy.

Chilean Production

Chile's production lines include: Aryan, Dario, and Ciary.

Trade Agreements

Free Trade Agreement (FTA)

An agreement signed between two or more countries aimed at eliminating all tariffs and allowing the free circulation of goods.

Partial Scope Agreement (PSA)

Sets rules to implement a program of scientific-technical cooperation for project development. It is a bilateral agreement that aims to eliminate tariffs on certain products. Usually, this is the first step towards a broader agreement (e.g., PSA with India).

Association Agreement (EPA)

A set of agreements between two or more parties on different themes or fields of work. It is an intermediate step between a PSA and an FTA. It allows for the removal of barriers and provides freedom to address non-economic issues.

Economic Complementation Agreement (ECA)

A denomination given by Latin American countries to bilateral agreements. Aim: Economic openness and inclusivity.

Economic Policy

A package applied by a country's economic authority aimed at achieving certain goals or modifying certain situations through the handling of variables called instruments. Aim: Achieving full employment of resources, a high rate of economic growth, a stable price level, external balance, and a fair distribution of income.