Age of 'Multilatinas' dawns and Chile wows with economic clout
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Shanghai Daily, July 1, 2011
Soft power is a buzzword that's always on the lips of cosmopolitan politicians and pundits. But it is usually associated with mighty countries like America and France, with their multitude of cultural icons, notably Hollywood and the Louvre.
By contrast, smaller nations with low international profiles usually do not spring to mind when it comes to soft power.
But the great Chilean mine rescue last October changed that perception as Chile radiated mega volts of soft power and earned worldwide admiration. All 33 miners were brought alive to the surface of the San Jose copper mine after being trapped for 69 days. The rescue operation - broadcast worldwide to fascinated viewers - was hailed as a miracle of life.
Respectful and newly appreciative eyes turned to Chile as they had in 1971, when Chilean poet Pablo Neruda was awarded the Nobel Prize for Literature.
However, the rescue is just a brief episode in Chile's long record of resilience. Also remarkable is its escape from the jaws of recession. The country, sitting on fault lines, was ravaged by a strong earthquake and subsequent tsunami in February last year. There were widespread fears then of Chile sliding into the financial morass triggered by the global downturn.
Those fears were laid to rest by Chile's strong rebound that began with massive rebuilding efforts. According to Juan Andreas Fontaine, Chile's minister of economy, development and tourism, the economy is now back on its feet and is projected to grow by 6 to 7 percent this year.
In a speech at the Antai College of Economics and Management of Jiao Tong University in Shanghai on Tuesday, Fontaine said Chilean growth has reached 9.8 percent in the first quarter of this year.
Bright picture
Other principal indicators of economic well-being also paint a bright picture, he said, pointing out that the unemployment rate has declined to 7 percent after peaking at 11.6 percent during the recession.
There was a period when Chile was struggling to keep a lid on runaway inflation, caused by a spike in the global prices of commodities, especially fuel, of which it is a net importer. Thus the prolonged turmoil in Middle East at one point looked likely to derail Chilean recovery, according to a Reuters report on February 25.
Yet the concern about inflation may also turn out to be exaggerated, Fontaine said. Thanks to effective macroeconomic control, Chile's inflation rate is estimated at around 4 percent by year end, consistent with the official target of 2 to 4 percent.
There are caveats, though. Chile's brisk growth over the past few years has been primarily driven by the buying spree of its copper by emerging economies like China and India.
In the event of a drastic slowdown of Chinese and Indian economies, reduced demand for Chilean copper might seriously hinder its growth. Growing interconnectedness of the global economy has lifted Chile's fortunes, but it also raises the uneasy question as to whether its commodity-based boom, closely dependent on others', can last. To stave off this doomsday scenario, Chile is looking at diversifying its sources of national wealth, making attraction of foreign investment a top priority.
Gateway
Chile is well positioned to become the gateway for new investment in Latin America from China, said Fontaine, for the Chilean economy is business-friendly with its transparent rules, incentives for the maturity of start-ups and political stability.
During China's Vice President Xi Jinping's recent visit to Chile, he and Chilean President Sebastian Pinera signed nine agreements, ranging from finance and telecommunications to agriculture and mining. Bilateral trade is also flourishing, with the volume reaching US$25.8 billion last year, an increase of 44.8 percent, said Fontaine.
Chile will achieve developed-country status by 2020 if its current growth at 6 percent a year can be maintained. That prospect looks bright now that the country has not just recovered from its worst calamity in years, but has emerged stronger.
Its spectacular rise, alongside the powerhouse of Brazil and other fast-growing economies in the region like Mexico and Peru, has led Latin American economists and officials like Fontaine to predict the coming age of "Multilatinas" - a host of Latin American countries or companies that are lifting the region from its stagnant years.
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