Trade partnerships have helped propel Chile along the road to development – but policy work in the trade sector and beyond is needed to boost flagging momentum, BNamericas was told. With the wrong policy mix and failure to both deepen trade integration and attract stronger levels of foreign investment, Chile may stagnate or potentially even see an uptick in poverty. Against this backdrop, Chilean president-elect Gabriel Boric’s spokesman Giorgio Jackson has indicated approval of a key trade agreement for Chile, TPP-11, was not among the incoming leftist administration's plans. Lawmakers and academics on both sides of the political spectrum have urged congress to ratify the deal, citing its importance for the country’s economic prospects. Some quarters of Chilean society oppose the trade barrier-lowering agreement, alleging it would infringe national sovereignty. Other signatory nations include Canada, Japan, Australia and Singapore. Having the right trade policy is a “key element” in Chile’s economic development and, in turn, the wellbeing of citizens, said local economist, academic and former central bank executive Guillermo Le Fort. His consultancy, Le Fort Economía y Finanzas, was recently commissioned to produce a trade-impact report for Fundación Chilena del Pacífico, a public-private organization tasked with supporting Chile’s economic insertion into the Pacific basin. The foundation also hosts regional economic forum APEC’s Business Advisory Council in Chile.
Le Fort, speaking to BNamericas after participating in a conference hosted by the foundation, where he presented the results of the research, said trade policy was just one part of the development jigsaw. “It’s important to indicate that the process of development is very complex, in such a way that you cannot consider trade policies to be the only element necessary to drive development. They need accompanying by other policies in other areas – finance, labor, education – to be able to generate a more comprehensive, complete process.” Chile has 30 free-trade partnerships, which have eased access to foreign markets for local goods and services exporters and helped propel development. Le Fort joined the chorus of voices recommending approval of TPP-11. “Continuing with the deepening of trade deals, enhancing them, improving their reach and complementing them, is what produces stronger growth opportunities, and TPP-11 is among those agreements that provide us with greater possibilities for future growth,” Le Fort said. “TPP-11 is a very, very important element and should be central to political debate.” On the campaign trail, Boric said he would review the country’s trade agreements.
On average, bilateral trade, following the signing of free-trade agreements, increases 20% in the first five years and 50% in the first 10 years, compared with years prior to their inking, according to the Le Fort report. Trade agreements have spurred Chilean exports, from US$8.4bn in 1990 to US$75.5bn in 2018. Exports as a percentage of GDP peaked around 2010, fueled by strong Chinese demand for raw materials. In terms of catching up to developed nations, Chile is losing steam, however. Chilean GDP per capita, as a proportion of US GDP per capita, has been trending down after peaking at about 41% around 2013. The proportion today stands at around 37% and under a baseline scenario established in the report, where levels of integration into the global economy stagnate, Chile would remain at the same relative GDP per capita level, failing to converge towards development. At least 30 years would be needed to return just to 2012 levels.