Pay attention to little Chile

One of the world's foremost women leaders is visiting Canada this week -- Chile's President Michelle Bachelet. Freshly elected as the first president of UNASUR, the recently founded South American Union of Nations, Ms. Bachelet, a quatrilingual pediatrician improbably specialized in strategic studies, is one of the most popular and internationally well-known of the new generation of Latin American leaders who have taken the region by storm.

Chile is the most distant country from Canada in the hemisphere, located finis terrae, cut off from the rest of the subcontinent by the Andes on the east and the driest desert in the world on the north. Smaller than most South American countries, and without the flamboyant image of a Brazil, an Argentina or even a Peru, Chile's style is low-key. Yet, it has come a long way, becoming, as one foreign correspondent put it, "the country other Latin Americans would like to be when they grow up."

Chile exported $67 billion U.S. last year; it ranks among the most attractive destinations for foreign direct investment anywhere; it has been clocking fiscal surpluses of four to five per cent of GDP a year, and is building up a sovereign wealth fund. It has the highest per capita income in the hemisphere after Canada.

Institutional stability and a democratic tradition recovered after the ghastly descent into dictatorship under Augusto Pinochet (1973-1990), and are flourishing now under President Bachelet.

In a meteoric ascent that led her from anonymity to the presidency in a scarce six years, she has undertaken many initiatives to strengthen Chile's social safety net. Despite strikes by students, teachers and workers eager to get "a piece of the action" (i.e., a share of the considerable foreign exchange reserves, projected to reach $30 billion U.S. by year's end), she has negotiated responsibly the first half of her term. Her approval rating is 50 per cent.

Canada signed a free-trade agreement with Chile in 1996, and is the third-largest investor in Chile today - mostly in mining, but increasingly in banking as well. Chile's natural resources-based economy has some parallels with Canada's (fishing, forestry and agriculture are also important foreign-exchange earners), and there is much that Chile can learn from Canada. Yet, there are at least two areas where the reverse is true.

With 54 signed FTAs (more than any other country), Chile has gained privileged, duty-free access to the world's main markets (including the U.S., the EU, China and Mexico, among others): this has been a key driving force for its export-led development, which has it now exporting more than 5,000 products to some 180 markets. In a country like Canada, where on a TV show a participant was laughed out of the room for suggesting an FTA with India (Chile has a preferential trade agreement with the latter, and trades more with it than Canada), there is a lesson.

The other is infrastructure development: a public private partnership model applied over the past 15 years has given Chile the best public infrastructure South of the Rio Bravo, although its roads were a public embarrassment as recently as 1990. Some $8 billion U.S. in private (mostly foreign) capital was invested in the country's highways, bridges, tunnels and airports, so that vast stretches of Chile's Panamerican highway today look like a German Autobahn. North America's crumbling infrastructure could do with a dose of the inventive public policies that made such an astonishing reversal possible.

There is more to Chile than meets the eye.

Jorge Heine is a distinguished fellow at the Centre for International Governance Innovation (CIGI) in Waterloo.

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