CHILE: THE REVENGE OF THE NERD

(Published in Australia's Magazine "The Diplomat" October-November 2004, page 33)

The most popular local movie in Chile this year is about two boys, one rich and one poor, whose friendship is strained by the social conflict of the early 1970s and is finally broken apart by the military coup in 1973 that deposed President Salvador Allende and brought General Augusto Pinochet to power.
Although it is more subtle in its intent and its execution than a film by Michael Moore for example, “Machuca” is in many ways a political film. Even so, commentary has tended to be reflective rather than bitter in tone and it has been well-received by the critics and the public from across Chile’s political spectrum.
Indeed, at first glance Chile appears to have put behind it the political turmoil of the 70s and 80s in favour of more mundane concerns like improving infrastructure and attracting foreign investment. For newcomers it can be hard to imagine that this country of modern office buildings and smartly dressed office workers was less than twenty years ago a military dictatorship.
While the truth is that memories of those times are still fresh and that they continue to strongly influence both politics and society today, Chile’s achievements over the last twenty years remain remarkable. Since the 1989 referendum that ended General Pinochet’s rule, Chile has held three Presidential elections that have been tightly contested but free, fair and peaceful. Particularly following the 2000 elections and in the lead up to the next elections in 2005, the various parties seem to be coalescing into a stable two-party system.
It is in economic terms, however, that Chile has become an example to many developing countries. Save for a dip at the time of the Asian economic crisis, GDP growth has generally exceeded 5 per cent per year and the per capita GDP of around US$5,300 is the highest in South America. Poverty levels have fallen from 38.6 per cent in 1990 to 18.8 per cent today.
In fact, its policies have been so exalted by economists, including at the IMF and World Bank, that Chile is sometimes called “the nerd of Latin America”. Fiscal restraint has brought inflation down to below 4 per cent in each of the past five years. Liberal foreign investment rules have not only stimulated the mining sector but have also attracted banking, telecommunications and services companies from the United States and Europe as well as from Australia. Trade has been liberalised much faster than in neighbouring countries and Free Trade Agreements have been concluded with Chile’s major trading partners including the United States and the European Union.
Against this background, in November Chile will host the annual summit of the Asia-Pacific Economic Cooperation forum (APEC), these days probably the world’s most important gathering of world leaders outside the UN General Assembly. For the host nation, the summit, along with the various meetings of Ministers, officials and business people throughout the year, is an opportunity to showcase its progress and to promote Chile as a place to do business including as an entry point for access to the wider South American market.
The APEC agenda itself will focus on the contribution the organisation, which comprises some of the most important players in the WTO, can make to progress on the current round of multilateral trade negotiations under the framework that was agreed at the WTO General Council meeting in July.
APEC will also seek to develop a strategy to respond to the challenge to its philosophy of open-ness and non-discriminatory trade liberalisation posed by the multitude of FTAs concluded and under negotiation in the region. This strategy may even include the first serious consideration of transforming APEC into a legally-binding Free Trade Area.
And, of course, it will be hard for APEC leaders to ignore the issue of international security. They will be concerned to ensure that terrorism and its flip-side – tighter border security measures affecting movement of people and goods - do not put a brake on economic growth and trade in the region. Finally, while APEC has tended to steer clear of broader regional security issues, tension on the Korean peninsula and over Taiwan can be expected to come up when Leaders meet bilaterally.
Summits of APEC leaders though are about much more than the formal agenda itself. For Chile, the attendance of U.S. President Bush, whether or not he is re-elected ahead of the summit, will be very important. Chile incurred Washington’s ire last year when, as a non-permanent member of the UN Security Council, it refused to support the invasion of Iraq.
Despite this, its FTA with the United States was passed by Congress last year and Chile’s active participation in the UN Stabilization Mission in Haiti, including through force contributions, have been deeply appreciated by the Administration. A former Chilean foreign minister, Juan Gabriel Valdes, was recently appointed as the Special Representative in Haiti of the UN Secretary General.
During President Lagos’ visit to Washington in July, President Bush described him as “a very wise man, ... a man of good advice and sound counsel.” How meaningful such pronouncements are can be debated, but it is nevertheless hoped that this return visit will heal any remaining rift between the two countries.
For Chile, the attendance by Asian leaders will be almost as important. About a third of Chile’s exports go to Asia. While trade remains dominated by copper, spurred especially by China’s demand for telecommunications cables, the export profile is becoming ever more diverse with seafood, wine and horticulture growing rapidly in importance.
Chile has already concluded an FTA with Korea and it is expected that, following preliminary discussions between officials, Chinese Premier Hu Jintao will give the go-ahead to formal FTA negotiations. Meanwhile, Chile is currently negotiating a trilateral FTA with two other APEC members – Singapore and New Zealand.
Chile aspires to enter the club of developed countries by the bicentenary of its independence in 2010. Despite the undoubted progress the country has made during the last twenty years, that goal still looks some way off. Poverty is still pervasive and unemployment levels have remained stubbornly close to double figures. And while Transparency International assesses Chile to be by far the least corrupt country in Latin America, the Lagos government has not been entirely immune from scandal.
But Chile is showing signs of a country that is more and more comfortable with itself while willing to confront its challenges honestly. Most people, for example, are pleased that legal efforts to bring Pinochet to trial for the human rights abuses of his regime are continuing but, at the same time, the 89 year old is seen as a figure of the past with ever diminishing relevance for the issues of today.
It is also revealing that the government sees no reason to give the capital the kind of extravagant face-lift that has been typical of previous APEC host cities. Chileans are not ashamed that world leaders will see Santiago flaws and all. In the words of the official in charge of preparations for the summit: “As a good host, we will put away the children’s toys before our guests arrive, but we do not intend to redecorate the whole house.”

Raul F. Campusano is a Professor of International Law at the Universidad de Desarrollo in Santiago de Chile and also lectures at Chile’s Andres Bello Diplomatic Academy. He is a consultant to Chile’s APEC 2004 organising committee.