Academic journal article Current Politics and Economics of South and Central America

Chile: Political and Economic Conditions and U.S. Relations*

Academic journal article Current Politics and Economics of South and Central America

Chile: Political and Economic Conditions and U.S. Relations*

Article excerpt

Political Situation

Sebastián Piñera of the center-right -Alliance for Chile," or Alianza, was inaugurated to a four-year presidential term in March 2010. Piñera's electoral victory was the first for the Chilean right since 1958, and brought an end to 20 years of governance by a center-left coalition of parties known as the Concertación. Piñera's coalition lacks majorities in both houses of the Chilean Congress, however, and he must secure the support of opposition or unaffiliated legislators to advance his agenda. This need for cross-coalition appeal has contributed to considerable policy continuity.

While Piñera has won legislative support for a variety of incremental policy reforms, he has struggled to deal with a series of popular protests over issues ranging from energy policy to the education system. Analysts maintain that the Chilean populace has resorted to such tactics to demonstrate its increasing dissatisfaction with the country's political class, which it views as unresponsive to citizen demands and unwilling to address high levels of inequality. As the generalized sense of discontent has spread, Piñera's approval rating has steadily declined. In April 2013, 34% of Chileans approved of Piñera's performance in office while 56% disapproved.

Since Piñera has less than a year left in his term and is constitutionally ineligible to seek immediate reelection, the Chilean political scene is focusing much of its attention on the presidential election scheduled for November 17, 2013. Early polling suggests that former President Michelle Bachelet (2006- 2010) is likely to lead the Concertación back to power. National primary elections to select each coalition's candidate are scheduled to be held on June 30, 2013.

Economic Conditions

According to many analysts, Chile has the most competitive and fundamentally sound economy in Latin America. In 2012, the country had a gross domestic product (GDP) of $268 billion and an estimated per capita GDP of $15,410. Chile's economic success stems from policies implemented over several decades that have opened the country to investment, secured access to foreign markets, and mitigated the effects of external shocks. In recent years, this solid policy framework has helped the Chilean economy weather the global financial crisis and a massive February 2010 earthquake. After a 0.9% contraction in 2009, the Chilean economy grew by 6.1% in 2010, 5.9% in 2011, and 5.5% in 2012.

Strong economic growth-paired with targeted social assistance programs-has also contributed to a significant decline in the poverty rate, which fell from 38.8% in 1989 to 14.4% in 2011. High levels of inequality have persisted, however, contributing to some popular discontent with Chile's generally strong economic performance.

Congressional Action

Congress has expressed interest in a variety of issues in U.S.-Chilean relations over the years. The 113th Congress could take up matters such as the U.S.-Chile bilateral income tax treaty, which was signed in 2010 and was submitted to the U.S. Senate for ratification on May 17, 2012 (Treaty Doc. 112-8). Ongoing negotiations over the proposed Trans-Pacific Partnership (TPP) trade agreement, which includes Chile, the United States, and at least nine other nations in the Asia-Pacific region, may also attract congressional attention.

This report provides a brief historical background of Chile, examines recent political and economic developments, and considers current issues in U.S.-Chilean relations.

POLITICAL AND ECONOMIC BACKGROUND

Located in the Southern Cone of South America, Chile is a politically stable, uppermiddle-income, developing nation of 16.6 million people.1 The country declared independence from Spain in 1810 but did not achieve full independence until 1818. By 1932, Chile had established a mass electoral democracy, which endured until 1973. During much of this period, Chile was governed by presidents who pursued state-led development and the social and political incorporation of the working classes. …

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