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But Chile, on the other hand, has managed
to break away from the group of emerging nations, is that right?
Certainly, in fact, today Chile enjoys
an improved situation in terms of country-risk between 180 and 200 basic
points. It reports the lowest risk in Latin America and of all emerging
countries it must be one of the lowest along with Hungary. However, Chile’s
internal political situation has worsened compared to the ‘90s: growth
has slowed, unemployment is higher and remains high. So greater volatility
in the region could be detrimental to this and next year’s growth rate.
Chile intends to become a US trading
partner but a Southern Cone crisis may give rise to two hypotheses about
its image abroad: it may be viewed as ‘stronger’ than its neighbors and
so with greater possibilities to join the NAFTA or may be regarded as
part of an unstable region. In your opinion, which of these view would
prevail?
Hard to know. People who in the United
States oppose the NAFTA enlargement or that Chile should sign a bilateral
trade deal with the US, will surely favor the second view: if the region
is unstable, it is not convenient to enlarge the treaty toward this spot
of the world where instability is almost chronic. So that would be the
banner of many people who oppose free trade with the United States.
‘Chile reports the lowest risk
in Latin America but the internal economic situation
has worsened compared to the ‘90s: growth has slowed down and unemployment
is higher’.
By contrast, the other point also hold
true. People who support Chile’s entry to the treaty might suggest –following
the Free Trade Initiative of the Americas launched by former President
Bush Sr- that a good starting point would be the nation which stands out
as stronger within the Southern Cone or Latin America. Both points may
be used by both sides depending on how the matter is solved in Congress.
Among the economic decision-makers in
Chile today, are those who forecast an Argentine default a majority?
Unfortunately I’d say yes. The situation
in Argentina is quite hard and so a default, devaluation or a combination
of both is believed to be the only solution. While it is true that the
zero deficit plan announced by Argentine officials is stringent, it is
apparent they find it hard to implement it. The debate in the heart of
Congress reflects the lack of political will to conduct a financial adjustment
of that sort. Who will pay for the adjustment: that is the question. What
we see from here is that Argentina’s chronic problem is of fiscal nature
and the signal to the rest of the world is that the country has been incapable
of sustaining a fiscal situation for some time.
In numbers, what are today’s growth
prospects for Chile and in what way have the changed lately?
Since early this year prospects have varied
from 4% to 3.5%, which is what most analysts estimate today. This percentage
could be lower if the situation gets definitely worse. And if the United
States recovers more slowly –trade relations with Argentina are not very
relevant anyway – I guess the growth rate for 2001 may decline to 3%.
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