NCPA - National Center for Policy Analysis


October 6, 2006

Chile's exceptional economic performance and the resulting welfare improvement are the result of systematic application of sound economic policies, says Hernan Buchi Buc, President of the Interna­tional Economy Center.

Some of those policies that were essential for the transformation include:

  • Trade openness and the flat tariff rate system.
  • Improving the strength of the private sector.
  • Encouraging foreign investment by modifying, streamlining and expediting procedures. 

However, says Buc, these reforms could not have been sustained without certain provisions to maintain them:

  • The creation or reformulation of an efficient network of social protection for families that, as a result of the crisis and endemic lack of economic dynamism, were becoming or remaining poor.
  • The existence of a set of laws and institutions that provided stability to the economic policies and that helped to maintain those policies over time. 

But despite its growth, Chile still has several barriers to overcome:

  • Achieving a culture that fosters growth and learns to value entrepreneurial activity as an impetus to job creation.
  • Rejecting the notion that only stronger state regulation will defend consumer' rights.
  • Letting go the mercantilist mentality that state policies protect companies and help them grow.

In retrospect, Chile can be highly satisfied with the path it undertook, says Buc.  But it must not revert to the same failed economic policies that it -- and many other countries -- have taken and failed with in the past. 

Source: Hernan Buchi Buc, "How Chile Successfully Transformed Its Economy," Backgrounder No. 1958, Heritage Foundation, September 18, 2006.


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