Latin America: Chile Now One Step Closer to First World

Andres Oppenheimer

While everybody was looking at the first round of Chile's presidential elections, led by center-right candidate Sebastian Piñera, a little-noticed event that took place two days later may be remembered as much more important in that country's history.

At a meeting in Paris on Tuesday, the 30-member Organization for Economic Cooperation and Development (OECD) -- the club of the world's richest democracies -- formally invited Chile to become a member.

Chile had applied for membership two years ago -- along with Russia, Israel, Estonia and Slovenia -- and was the first of the group to be admitted. It will become the first South American member of the OECD after an official signing ceremony Jan. 10 in Santiago.

Granted, Chile's President Michelle Bachelet may have downplayed the Paris meeting to give the maximum public relations exposure to the upcoming ceremony in Chile. Bachellet most likely wants to give a much-needed boost to ruling leftist coalition candidate Eduardo Frei in the Jan. 27 runoff.

Still, Chile's leftist governments of the past two decades deserve full credit for showing the world that there is such a thing as a modern, globalized, financially responsible left in Latin America, which reduced poverty faster than any of its counterparts in the region.

In a telephone interview from Paris, where he was attending the OECD meeting, Chilean Finance Minister Andres Velasco reminded me that his country has reduced poverty levels from 40 percent of the population in the early 1990s to 13 percent last year. Extreme poverty, or the number of people living on less than $1 a day, has gone down to 3 percent of the population.

Asked why Chile succeeded where many other countries have failed, Velasco told me that one of the reasons is that after a time of political violence and economic turbulence in the 1970s, Chile emerged with a new national consensus to support stability.

Most recently, the Bachelet government's 2006 decision at the height of Latin America's commodity price boom to save money from its copper exports for a rainy day proved to be a godsend when the world economic crisis hit the country this year, he said. Chile's economy is projected to grow by 5 percent in 2010.

"In Latin America, we have long been used to commodity booms that end in crises," Velasco said. "In Chile, we decided to buck the trend, and we succeeded."

Economists agree that while Venezuela, Argentina, Ecuador and other commodity producers have spent much of their record export incomes over the past five years in politically aimed cash subsidies that will do little for their countries' long-term development, Chile has created several funds to become more competitive in the global economy.

One of the most impressive is a $6 billion education fund, whose annual interest revenues will be used to send 2,500 post graduate students a year to get master's and doctoral degrees in U.S., British, Canadian and Australian universities.

After talking with Velasco, I asked Patricio Navia, a New York University professor who spends his time between New York and Chile, whether he sees the OECD's acceptance of Chile's membership as a major story. After all, Mexico was admitted to the OECD in 1994, and Mexico's economy has not taken off, I reminded him.

True, but Mexico's admission to the group took place in a different context, when Mexico was undergoing a political and economic opening, he said.

"It was much more a declaration of wishful thinking than an assessment of reality," Navia told me. "In Chile's case, it's an assessment of reality."

My opinion: Chile's economic engine has lost some steam during Bachelet's government -- the country has lost positions in several world competitiveness rankings, and its growth rates have slowed from earlier this decade -- which may help explain the success of Piñera's "we need change" message in the recent first-round election.

But, whether a Piñera election in the runoff would speed up Chile's rise to the First World or not, the country's leftist coalition should be applauded for its accomplishments. While other self-proclaimed leftist governments constantly promote conflict and scare away investors to support their authoritarian projects, Chile's left has done what it was supposed to do -- reduce poverty.

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