The picture looks all but clear for the Chilean economy. Protests have taken a toll on the services sector, dragging GDP to its lowest growth in a decade. And, above all, they have put one of the most dynamic economies in the region on the mirror: the supposed miracle is more in question than ever. With the slowdown as a backdrop and months after the publication of a devastating study on his country, which came to light a few days before the start of the protests, economist Gabriel Palma (Santiago, Chile, 1947) attends EL PAÍS for videoconference from his office at the University of Cambridge, where he is professor emeritus – a function that makes his work as a teacher compatible at the University of Santiago. He flees from a short-term reading of the data and prefers to draw a long-term horizon. And there, his diagnosis is meridian: “Chile closed a cycle and needs a State capable of generating a new development policy.”
Question. 2019 ended with the lowest growth in a decade. To what extent have you weighed the protests?
Reply. The Chilean economy is, in fact, two: an exporter, which has not been affected and continues to grow, and another for services and construction, of low productivity and which has suffered due to the impossibility of many employees arriving at their jobs .
P. What do you expect by 2020?
R. A minimum growth that will come, above all, from the export sector. It is clear that a complicated year is coming, of a strong slowdown on an economy that was already very slow. The right believed that everything depended on expectations, but won [Sebastián] Piñera and nothing happened. In addition, another discontent reaction cannot be ruled out if little or nothing happens with respect to the constituent process underway.
P. And the investment?
R. There the protests will take effect. For example, the arrival of foreign capital is going to slow down, although in Chile foreign investment in truly productive areas is minimal.
P. To what extent should the depreciation of the peso worry?
R. Since 2001, a very orthodox policy of free exchange rate has been followed. But, unlike other countries, Chile has few reserves to keep the peso from depreciating: Brazil, for example, has three or four times more reserves in comparable terms. The central bank married its own fundamentalism and did not prepare for a situation in which it had to act. And now he has to be very careful.
P. He does not like the exchange rate to fluctuate freely.
R. In an economy like Chile and in an international context like the current one, it is absurd, self-destructive because of the uncertainty it generates. There is the experience of many Asian countries in which a stable and competitive change has been fundamental to diversify the economy. And there is something that is not talked about and that I think is what most worries the central bank: the Chilean private sector has the highest debt, as a percentage of GDP, of the entire emerging world. More than China, Russia, Turkey … And it’s dollar debt.
P. Is there a risk of bankruptcy?
R. In the short term no: they still have room for maneuver to support this type of change and even a somewhat higher one, although with an impact on margins and investment. Some will pay existing debt with more debt, transforming the short-term problem into a medium or long-term one.
P. Some analysts are surprised that protests occur precisely in one of the richest countries in Latin America.
R. The only thing that everyone agrees in Chile is that what happened was a surprise. But there were important signs that were ignored, as if in the last presidential election more than half of the population did not vote, even in the second round. It was thought to be apathy when it was a protest vote. The rejection of widespread abuse also grew. The Chileans have a lot of patience and endure much beyond what they should, but when they run out they go out with everything. The rapidity and virulence of the outbreak have to do with that, with which it endured for too long: protests broke out practically for nothing – a rise in the dollar cents meter – but there was a latent social discontent over systematic arbitrariness. As one of the slogans of the first days said: “It’s not 30 pesos, it’s 30 years.”
P. What has happened in these 30 years?
R. It has not been a matter of lack of growth, but of a level of abuse that has become unbearable. For most, private pensions are starvation and the system has no solution; Public health is a shame for a country like Chile, as is public education for low-income groups. And the infrastructure and natural resources were given to private. When you leave a deregulated market and a state that goes behind solving problems passively, large corporate sectors distort the markets in their favor: competition is reduced, the economy is not diversified, and price and poor quality abuses begin. products and services they provide. Add to that all wages: half of Chilean workers do not earn enough to get a family of four out of poverty. Chile is at an income level where it should not allow such situations. And it is a country that is believed to be at the doors of development …
P. The Chilean model has been, for years, an example to follow for many. What happened?
R. That model is already sold out: he already gave what he could give. The services sector only grows due to the increase in low-wage employment and the export sector, which is purely extractive, has hit a ceiling and is only interested in growing in neighboring countries. That model will not give, in the future, beyond 2% or 2.5% growth. Yes or yes you have to industrialize the export sector, especially copper and wood. More than 1,000 ships with concentrated copper leave Chile every year, a material that has only 30% copper content. The rest is scum, so the main product that Chile exports is, by volume, garbage. Imagine the useless pollution generated by its transport. It is absurd; Has no sense.
P. What should I do?
R. Industrial policy and commercial policy: what Asia has done throughout life. In the case of copper, for example, what I propose is to charge a royalty [tasa] differentiated as an instrument of industrial policy, to force it to at least be founded in Chile.
P. It would raise more.
R. If natural resources paid royalties that corresponds to them, the fiscal pressure would go down and we could have a health system, an infrastructure, an education and a social security of a civilized country. Today, copper supposedly pays a royalty That is a lie, and they are resources that are needed. That is one of the biggest shames and reveals an absolute lack of long-term vision. The Constitution says that we Chileans own all the natural resources of the country and have the right to all their income. Lack royalties It really is something directly unconstitutional.
P. Diversification remains a great workhorse of the Chilean economy. It has been tried many times, but …
R. Chile is one of the relatively less diversified economies in the world and without direct public intervention that change will not occur. We are on the way to half a century of neoliberalism and there is no indication, zero, that there is interest in the export sector in diversifying. The Chilean State is a subsidiary, which focuses on solving the problems left by the private sector and stifling discontent, and does not look forward. Chile does not need more State in the sense of quantity: it needs a State that is capable of generating a new development policy. A cycle has already been closed and the State must take it towards a new one, leading the private sector and ultimately going to the bottom of the problem.
P. Why has industrial policy been renounced?
R. By ideology and because the private sector has a lobby Very strong about the government. The concentration of wealth leads to a concentration of power.
P. There have also been progressive governments: those of Ricardo Lagos and Michelle Bachelet. But economic policy has remained. Why?
R. The Chilean center-left separated economic and social policy in its mind. He made a progressive policy on the side of values: divorce, abortion, gay collective rights … But economically he did nothing original. To the point that many of the abuses, such as the worst infrastructure concessions were his.