Tale of 2 Chiles: Official Economic Success Story May Be Only Fairy Tale

The right-wing military government’s economic program, a linchpin in its bid to rule until 1997, is winning high praise from bankers and businessmen but most Chileans say things are no better for them.

Some local economists refer to the contradiction as a tale of “two Chiles.”

In one Chile, government statistics show three years of increased production, a healthy diversification of exports, a shrinking public deficit, one of Latin America’s lowest inflation rates and a significant decline in unemployment.

In the other, according to private studies and opinion polls, most Chileans are still mired in a daily struggle to make ends meet.

President Rejects Poll

In one such survey, the Santiago-based Latin American Social Sciences Faculty reported that 15.1% of those polled said their economic situation had improved, 40.2% said it was unchanged and 44.3% said it had worsened. The remaining 0.4% gave no response.

President Augusto Pinochet, an army general who took power in a 1973 coup, rejects the results of the poll, which also show scanty electoral support for him and his administration. He has charged that it was conducted by political opponents who “put words in the mouths” of those surveyed.

His government plans a yes-or-no ballot next year on a single presidential candidate to be picked by the armed forces chiefs and to rule until 1997. Although the air force and navy chiefs earlier this year said that they did not think Pinochet should seek the nomination, he appears to be aggressively seeking it, often touting his economic and social reforms as a success.

“Chile today is an example, for its ability to produce and to provide employment, and for its . . . price stability,” he said in a state-of-the-nation speech Sept. 11, the 14th anniversary of his coup.

Inflation Holds Steady

According to official statistics, Chile has enjoyed one of Latin America’s most stable, productive economies since it began recovering from a near-collapse in 1982-83, when a drastic free-market policy accompanied by heavy foreign borrowing went awry.

The gross domestic product grew 6% in the first half of 1987, after similar increases during the past three years. Official unemployment now stands at 10%, about half what it was in 1982.

The annual inflation rate has held steady at about 20% for more than three years, in contrast to the triple-digit average hitting Chile’s neighbors.

Exports have risen steadily, with products such as fruit, fish meal and lumber reducing the historical dependence on copper sales. Copper now represents 41% of all exports, compared to 82% in 1973.

The government deficit has been shaved to 1.8% of the gross national product last year from 4.3% in 1983. Savings have come from the “privatization” of state-owned companies, some of them purchased by foreign corporations.

A free-market policy and economic stability have attracted international investors, who laud Pinochet’s program. Similar praise is heard from foreign creditors, who have approved a rescheduling of the country’s $20-billion foreign debt through 1989.

“Chile maintains one of the most open investment climates in Latin America,” John Bohm Jr., president of the Export-Import Bank of the United States, said on a recent visit. In an address to the local American Chamber of Commerce, he predicted “a healthy rate of economic growth through 1988.”

Critics Cite Hidden Costs

Robert Gelbard, the U.S. deputy assistant secretary of state for South American affairs, was quoted as saying in an interview with the Santiago newspaper El Mercurio: “We have said we consider the Chilean macro-economic program one of the best in the hemisphere and perhaps one of the models for the Third World.”

In a visit in August, Gelbard called Finance Minister Hernan Buchi “a genius.”

However, several private local economists contend that the government’s plan has carried a high, sometimes hidden, social cost.

Patricio Meller of the Santiago-based Corp. of Economic Investigations for Latin America claims that the official inflation rate has been understated for years. The result, he said, is that wage-earners are much worse off than the government maintains.

Meller is co-author of a study entitled “The Two Chiles,” which challenges the government’s methods for compiling statistics.

While real wages officially stand at 95% of 1980 levels, he said, they are really much lower. “Look at per capita consumption,” he said. “In certain basic goods, consumption is down 15% from 1980.”

Meller said at least 75% of all Chileans earn a monthly wage of less than 40,000 pesos, the equivalent of $178.

“Bread basket prices here are more or less at international levels,” he said, meaning that they are relatively not much different from other countries. “How would a family in the United States live on $178 a month? That is the question.”