Chile in the 1990s: Embracing Development Opportunities

AuthorEduardo Aninat
PositionChile's Minister of Finance from 1994 to 1999, is a Deputy Managing Director of the IMF

    A review of Chile's recent economic performance shows that, overall, the 1990s were a period of vigorous and unprecedented expansion, with average annual GDP growth of 6.5 percent. While 1999 was a time of economic adjustment after the fallout of the Asian crisis, Chile is now ready to resume healthy growth in 2000 and beyond.

At the end of the nineteenth century, Chile-mired in political and economic stagnation-wasted a historic opportunity to embrace a development-oriented economic strategy. At the close of the twentieth century, it did not repeat this mistake. Taking advantage of an increasingly effective economic and institutional infrastructure, Chile seized the opportunity and left the twentieth century with poverty levels significantly reduced, the distribution of personal spending notably improved, and education, judicial, and tariff systems substantially reformed. A decade of change left Chile poised to strengthen its development performance and stride purposefully into the new millennium.

Growth and stability

Over the past decade, Chile at last broke free of two long-standing economic handicaps: a highly volatile pattern of economic growth and a long history of inflation. In the 1990s, Chile recorded its highest average growth rates and the least volatility in a hundred years (see table). Between 1994 and 1998 (when major crises occurred in Mexico, several Asian countries, Russia, and Brazil), the Chilean economy grew an average of 6.9 percent a year, well above the average annual growth rate of 3.0 percent for the twentieth century. For most of the past century, Chile's growth rates fluctuated sharply, with the variability in those growth rates-as represented by the standard deviation of the rate of growth-several times larger than the average growth rate. During 1970-79, for example, annual growth averaged 2 percent, but the standard deviation was 7.3 percent. Between 1990 and 1998, this relationship was reversed. Average annual growth was 7.3 percent, but the standard deviation was just 2.9 percent.

From 1986 through the end of the 1990s-including the 1999 recession-Chile enjoyed the longest, strongest, and most stable period of growth in its history. During this period of vigorous, sustained growth, the country was also able to overcome its second economic handicap: perennially high and unstable inflation. Chile now has brought...

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