Source: International Reports.net

After two years of difficult economic times in select places throughout the world, Chile has managed to maintain a sense of stability, transparency and economic growth. This is best exemplified through its signing of a free trade agreement with the European Union and in the current negotiations that are going on in order to secure a free trade agreement with the United States.

When asked for an evaluation of his last two years in office, President Lagos exclaimed that he is satisfied with the overall performance of his government, however, he did not hesitate to wish for better luck in terms of the global economic outlook for the upcoming years.

“During the last two years, Chile managed to grow at 5.5 percent and 2.8 percent, respectively,” said the president, all the while in the midst of “an economic crisis.” Lagos added, “This is the first time in 30 years that there has been a crisis going on at the same time in major economic areas around the world, such as Asia, America and Europe.”

“For Chile, the price of commodities and the terms of trade are very important. If, in the last two years, we would have had the terms of trade that we used to have during the 1990s our rate of growth and our national income would have been three or four additional points. Instead of 2.8 percent, we would be talking about six or seven percent ,” explained Lagos during a recent interview at La Moneda. He pointed out that in spite of these adverse regional and international circumstances, Chile’s growth was four times greater than that of the rest of Latin America and almost twice that of Europe.

The president reiterated that the Chile he envisioned when he began his six-year tenure is one based on a synergy of socio-economic growth based on the consolidation of democracy and the self-realization of all Chileans within globalization and a market-oriented economy. President Lagos also mentioned the approval and implementation of a series of important reforms that allow for a more egalitarian development in Chile.

Among these are modifications to the Labor Code, including a reduction of the 48-hour workweek to 45 hours. Others incentives call for collective bargaining of the workforce and the implementation of an unemployment insurance plan. Although, for President Lagos these are important reforms that will enable growth along with social justice, many in the private sector see them as obstacles for growth and investment.

The president also mentioned the approval of new legislation against tax evasion and categorized the internal revenue service of Chile as a modern and efficient service. Of all the income that was declared over the past year, 42 percent was done so via the Internet.

Lagos also made reference to implementing such programs as the 12-year compulsory school system; decreasing the digital divide; connecting libraries and more public schools to the Internet with aid from the Bill Gates Foundation and companies like Oracle, in hopes of fomenting a cultural renaissance in Chile.

Moreover, Lagos noted that in light of the high level of unemployment in Chile, his government has put into place an incentive program in order to promote private sector employment that, during 2001, created 150,000 new jobs. These jobs, in addition to the country’s sophisticated telecommunications and transportation infrastructure, various housing programs, constitutional and judicial reforms, and stricter environmental regulations, are the primary elements surrounding Chile’s economic growth.

Yet there are several aspects topping the agenda for the next few years that, according to Lagos, are vital for the full evolvement of Chile. These priorities are healthcare reform and the fight against extreme poverty.

With respect to healthcare, the government has presented a program called Plan Auge, which aims to provide a public healthcare system that guarantees access to the basic elements in healthcare for the two-thirds of the Chilean population that is unable to pay for a private system (Please refer to page six for details on the healthcare reform).

According to President Lagos, there are 850,000 Chileans living in extreme poverty, in a country with a per capita income of $5,000. His government has proposed a subsidy system, called Chile Solidario, in an effort to eradicate indigence. This program, which includes a series of subsidies and instruments to facilitate access to health, education and other general services, will be taken to the places were these people live.

Lagos believes that it is essential for Chile to offer equal opportunity in education because it is the means through which the nation will be transformed and relinquish indigence. For example, “We recently launched a new program to provide breakfast and lunch in schools,” said President Lagos. “We have 3 million primary school students and 1.5 million are receiving free breakfast and lunch. If in addition to food, we provide computers then those kids are going to be better equipped in order to be able to compete,” said the president, a firm supporter of the integration of technology and education.

“It seems to me that given the world that is emerging, knowledge, creativity and education are probably the most important tools. The difference between the haves and have-nots 300 years ago probably had to do with who owned the land. With the industrial revolution 150 years ago it probably had to do with the ownership of the means of production, the capital goods, and who owned the industry. Today, if you want to explain the major fortunes of the world, some of them are the result of creativity and knowledge and nothing to do with land ownership.”

When asked how his socialist vision has changed through the years, Lagos stated that “being a socialist today, I guess, is to discriminate and to give more resources to areas like education, to those areas that need more so that all kids are equally equipped to learn, to think and to open their minds. If you don’t discriminate and give the same amounts to everybody, then you are going to keep the differences.”

How do today’s leaders build a nation in this age of globalization? President Lagos believes that the primary question to be answered is: which public goods are going to be provided by the government and which by the market economy?

“The most elemental public good is to be safe. The second one is to have internal order and a judicial system that works,” said the president, “but, what other public goods? Who makes the decision what goods are going to be public and what goods are going to be private? The answer, some people would say… is the market, but I don’t think so. If the market makes the definition, then it is made by the consumers and even though we are all consumers, some consume more than others because they have greater purchasing power. Therefore, I would like to think that the decision of what things are going to be public is going to be made by the citizens. Since we are all citizens, it is a more democratic decision. Today you can say that education, health, and potable water are public goods, but these can be done through the markets, which is different.”

A while ago, Chile decided that its continued development was going to be linked to what is happening abroad - that the international markets were going to be their market.

Ever since the moment when Chile first regained its democracy, its leaders have been establishing the fundaments for the years to come. “The foundation has been put in such a way that now we are in the process of starting a new era of development in Chile in terms of export promotion and being able to compete abroad and with those firms coming to Chile,” said the president. “Once you open the economy, you have to compete, and to compete you have to be modern, efficient, and transparent,” stated Lagos, emphasizing as well that Chile, according to international rankings, contains low levels of corruption.

Chile’s recent agreement with the European Union is another important free trade landmark in its already prominent track record of 12 free trade agreements with countries around the world, including Mexico and Canada. Their focus right now is finishing the trade negotiations with the United States and then, gearing their attention to the Asian Pacific basin, where most of the significant world growth is expected to occur.

President Lagos is fully focused on positioning Chile as an active participant of globalization and free trade. During these negotiations, the main concerns have been the real access to the markets and how these differences are going to be reconciled so that antidumping cases do not become excuses for protectionism.

“I understand that in some areas there are going to be some difficulties. What we are offering is the possibility that, through Chile, they can reach other Latin American countries, whose governments are also negotiating treaties in order to avoid double taxation.”

Furthermore, President Lagos points out that these trade agreements with Chile have important political considerations. Primarily, they are going to become key signals of confidence for countries in the region and, he stressed, that the region needs this confidence.

Secondly, the agreement with the United States has to be one that is beneficial to both parties, because countries around the world are curious to see if a treaty with a small nation like Chile is worth imitating. In other words, this treaty could become an incentive for other nations to incorporate a more open approach to the process of integration of the world economy.

Given the growing need for security in today’s world, Chile recently bought ten F-16s from the United States in order to replace its aging air fleet. Nevertheless, this acquisition is not a raise of arms, but rather Chile’s need to modernize its air force. As an effort to homogenize the defense inventory in the region, Chile and Argentina have created an agreement to measure the amount of defense expenditures in both countries. Chile is also negotiating a similar agreement with Peru.

According to President Lagos, a significant change produced after the events of Sept. 11 was the
creation of a coalition of nations taking a stand against terrorism. According to Lagos, this coalition faces various challenges. One is to maintain the values of freedom, open markets, free trade and human rights.

The other challenge, which is an important concern for Lagos, is “How are we going to update the institutions that were formed during the Second World War, such as the United Nations, the International Monetary Fund and the World Bank?” Lagos explained that, these organizations created during the 1940s and ‘50s, need to be transformed to the realities of the 21st century.

President Lagos pointed out that almost every year a large national economy somewhere in the world has been in trouble, for example, Mexico in 1995, Russia in 1998, Brazil in 1999, Turkey in 2000 and Argentina in 2001. The president believes that something has to be done at the international level and that the world communities have to address how they can assist countries experiencing difficult situations before they result in economic, political or social crisis.

Regarding the Argentine situation, Lagos states that his government is cooperating fully with the Argentine government, in addition to providing assistance to the multilateral organizations, which are concerned with what might happen in the region after this crisis.

In light of the current world panorama, President Lagos expressed the need to work cohesively in order to strengthen alliances such as the one that would develop the Free Trade Area of the Americas (FTAA).

“I think that President Bush is correct when he is talking about the Free Trade Area of the Americas, because to some extent the FTAA represents not only trade but common values in the areas freedom, pluralism, tolerance, rule of law, democracy, and human rights,” says Lagos. “What happened on Sept. 11th violated the most important area of human rights, which is why the answer was so strong and why it is extremely important to have this FTAA.”