Chile’s Economic Resilience Amid Global Financial Crisis
Development of Industrial Projects
Currently, all world countries are in a financial economic crisis of great magnitude, whose beginnings are estimated for 2007. Currently, in March 2009, it is estimated that the crisis has not yet reached its critical point. All countries of the world have reduced their economic growth and many countries, including the most powerful economies, are experiencing a downturn. Economic development is negative, this means that many of these countries have entered what is called a recession, defined as when a country experiences a negative change of GDP for more than 2 consecutive months. Our country has not yet entered a recession and, in the opinion of economists, not even a glaring recession. The general view among economists in the world is that the crisis would have its lowest point in the second half of 2009 and perhaps in the first half of 2010, to experience a rebound soon, and enter a new economic era from 2011.
Economic crises are cyclical economic phenomena that occur from time to time, proper economic liberalism and market economy. The first major crisis happened, and who was known and discussed by all economists of the world, was the crisis in the U.S. since 1929 and is impacting the rest of the world through international trade existing at the time. This crisis, called the Great Depression, started due to a sharp fall in equity securities held for New York (Wall Street). This caused a financial panic group of investors at the time that coordinated deep dislocations in the U.S. economy and somehow the economies of other countries (at that time there was a current globalized international trade). Yet the effects of the disorder in the U.S. economy impacted other countries in Europe and triggered the “Great Depression”, fell well the pressure of shares of public limited companies, shares also fell in real estate, money became scarce and financing available, they stopped and industries. This economic activity in general. The price of raw materials and so-called commodities (goods sold) fell. Situations that might qualify as absurd occurred, as is the case of stopping an important part of the population on the one hand and on the other food producers, as is the case of wheat, throwing them into the sea to rise in price.
The crisis of ’30 took about 2 or 3 years to remedy and about 4 years to reach normal. This event was carefully studied by economists of the era as well as studies by economists later diagnosed as a possible situation to happen regularly in an absolute economic liberalism regime that existed in the U.S. All contribute to the economy began to be studied in an increasingly practical, with increasing participation in math and sciences.
As a result, mathematically addressed thereafter refined tool operations research, economic development plans established by the parent and product inputs that were introduced and studied in American economic policy. We can say that with the great depression term gives absolute economic liberalism, Frangos the American economy more and more in subsequent years as a command economy. With this change, we may later come to what was defined as neoliberalism. After the crisis of the 30’s, there have been other crises in the world with global impact such as: Yankee-war, oil crisis 70′, crisis of 1981-1983, crisis in 1997 (Asian crisis), and the current 2008 crisis.
All the crises since the Great Depression would be showing us that what is known as planned economy should be even changed, perfected, intensified. In order that these phenomena are cyclical, they should be avoided or diminished in intensity and duration. That is a long way yet to learn and do to improve the situation. Science as such in its various branches of progress never ends and here we must include economic science has become more than a social science social technique. The economy is trying increasingly detaching objective of what we might call economic policy, but is generally in the present of this economic science course must be at the service of mankind. It must achieve economic (material) as part of personal development. Today we also have the requirement that the world we live in is limited, and general policies are currently human neo-liberalism and socialism on the other renovated and eventually tend to approach each other, according to the characteristics of each country and each ruler. There is also a great task to be performed by a harmonious coexistence of mankind and a coordinated economic development between countries.
With the experience that mankind will acquire the development of the current economic situation of the financial crisis, which is expected to set a new world of interaction between countries and their corresponding coordination in order to minimize, manage and possibly avoid future cyclical situations like the current crisis. This meant returning the criteria and knowledge already exists of political and economic philosophy. This is expected to correct the inherent effects (own) free market among the countries in the current situation of increasing globalization.
Independently of domestic policies that take each country decides for itself (the free market or planned economy centrally) we must consider the current reality that international trade between countries is governed by now for a free market system, where governing laws of supply and demand with all risk that mean the emergence of speculative operations are limited groups of people, the idea is to reach the fairest possible system of equality and opportunity between the inhabitants of the planet, this does not pretend achieve full equality in every sense among people that although it is a great ideal desire of excellence does not apply and does not occur in all living beings in nature.
In nature, there is a diversity of eco-environmental situation that applies to all living plant and animal kingdom and therefore to man. We all have the same opportunities.
Reasons that are considered favorable for our country is facing Chile on satisfying:
- Our economy is dependent on the high copper which is the order of 50% of the value of our exports.
- Chile is a country poor in oil and must import most of its consumption.
- The crisis plunged the oil and copper values.
Oil was at $140/barrel to $40/barrel, copper was $4.4/pound to $1.4/pound. Similarly, values have fallen fall of other commodities, for Chile the falling price of copper is inconvenient, but oil is good. An estimated price will rise both to end the crisis.
The free market global economy among the countries falling causes the economy of any country in the world, affected the rest of the country in some way, or there is a situation where each country’s interest that everyone else is good without exception clear that in varying degrees. In the phenomenon of recovery in prices is somewhat logical considering that the copper would recover sooner than the oil. Oil is destined to be replaced and possibly eliminated, and because its use is harmful to climate change. This was replaced by biofuels (e.g. biodiesel and ethanol) of both technology already in development is estimated that the energy price equivalent of biofuels are the order of $70/barrel of oil. There is no ceiling for copper, because it is noble metal and there is no need to replace it. Copper is a metal for the world, such as aluminum, and our country is rich in copper.
In the world, there are copper mines although these are rare but there are laws minerals is lower and higher cost.
Chilean Economy, Development Projects, and Infrastructure
In the current period of crisis and subsequent estimated period (2009 – 2012) was mentioned last class weaknesses and strengths against the current global financial economic crisis our country is as important economic activity and especially pertaining to the export sectors of mining copper, copper is present about 50% of our export is high rate that depends on the fluctuations of international prices. In recent years Chile has achieved success in their efforts to diversify its economy and export items in this has been very important to the economic opening in Chile is now the Latin American country has the largest network of free trade with economic powers like U.S., Europe joined Japan and emerging powers such as Korea, China and India recently. The treaty with the U.S. is accompanied with countries linked to the U.S. itself, there are the NAFTA countries comprising the U.S., Mexico, Canada, there is free trade with other countries in economic value but are smaller are important, as for New Zealand, Singapore, is treated with Central American countries and one signed recently with Peru. Chile practiced as a partner in Mercosur and added it. This position of free trade against globalization is recognized as valuable and recognized, the rest of Latin America are tempting in various stages of development following the scheme in Chile which is not easy for them because it entails a sacrifice large sum of their domestic industries. Mexico and Peru are actively pursuing this policy especially Peru has been advantageous for the Latin American country that had the greatest increase in its GDP as a result of this openness has made diversifying Chile economies and exports, reducing the incidence of copper from 70% or 80% years ago (which made Chile practices of a country producing mono) Up to 50% mentioned above, the new economic items are developed Chile capture fisheries, aquaculture, forestry and farm forestry industry, agriculture, each of these areas include a number of industrial projects have been and will continue on into the future.
As a result of successful economic development in industrial projects of the aforementioned items has been opened Chile additional potential projects in other areas that are necessary to support and give sustenance to the categories of imports; these areas: energy (electricity) general infrastructure in the energy area should mention the interconnected system of central and northern Chile big. Projects of this item electric energy have been developed over the past 10 years in a limited way to some point, which is being corrected now (one speaks of the decade of the day). The fact that a gene is Chile copper exporter and an importer of oil gives it a special economic status to the crisis the two commodities have dropped their price notorious.
The oil of $140/barrel at $45/barrel app. Copper $4.5/lb to $1.35 per pound app.
It is expected considering that the price of copper will be recovered more quickly than oil reaching a better level of sustainability. Oil is a fossil fuel for which humanity should look for replacement versus copper is not a product that should be changed if humanity is to be hoped that future consumption increased with increasing power. It is a fact that oil prices will have a future that a roof is not going to be past, priced sales justifies the biodiesel and ethanol biofuels should be equivalent to $70 or $80. This means that Chile may continue in the long term with their proposed copper mining at the present time must take care and get as far as possible the costs of production which is valid for both Codelco and other.
Chuquicamata Mine is no longer the efficient but so is the El Teniente. Chilean mines are good law, existing industries that are capable of withstanding the low prices it does not happen with other mines in the world that began to function temporarily proceios building on high and whose production costs are higher than these Chilean mines mines are closing down at the moment and they will probably not start again.
Chilean Aquaculture: Salmon Industry
This item initiated by forces in the 1990s (exp. frozen salmon) and place our country as the 2nd largest producer after Norway’s world has suffered in recent years a biological problem due to a virus that has attacked the facility salmon (ISA virus) in addition to that there are problems with an alga that has affected.
Currently, this is in the process of study and solution and executives of major Chilean salmon have gathered to confront the situation as a whole is estimated that this will be addressed and that the force Chile resume exports of Salmon.
Agriculture and Forestry Industries
The Chilean situation is not bad as the dollar rose to benefit the Chilean and indeed have benefited from the low oil price.
Forestry: Chile has been affected but the situation is not bad medium and long term this adds to the great financial strength that exists in that category (Arauco, CMPC).
Infrastructure Development of Electricity Generation
Our country has developed its economy accentuated over the past 20 years due to its policy of economic opening that has generated an interesting network of free trade agreement that allowed rapid integration to the current economic globalization scheme.
With all that has been expanded export various fields including many non-traditional exp, we can describe the fields mentioned above as those for economic direct action as a result corresponds expand parts of basic infrastructure and in this sense we can include power generation infrastructure and civil works, it is normal that the progress of infrastructure projects are carried out with a lag or somewhat a posteriori of direct economic action projects. In the electricity sector generation of our country is (%) in two large blocks interconnected system and the north central great.
Over the past 20 years developing high technology form the thermal bands of natural gas generation with continuous cycle calls that are of this type of plant efficiency tended to replace coal thermal plants until late last century and early increased by the lower cost of production this was a real bum of the application of natural gas in electrical appliance in the last 10 years since the last century (1990 to 2000) Chile joined this trend constructing several pipelines to supply natural gas from Argentina and it came to sign international trade agreements, the progress of natural gas was very noticeable, it was so much during the last event of the Asian financial crisis (97-98), there was a sharp drop of shares held in companies that have coal-fired power plants, achieving best way to keep those with combined cycle plants.
The treaty of importing natural gas from Argentina was not successful, because Argentina ended up using much more natural gas than expected initial had been an error in the estimates and projections of Argentine natural gas production in Chile result could not use natural gas Initial as expected due to that combined cycle plants that were installed (Endesa, Colbún and others) had to run on alternative fuel that is petroleum diesel and is therefore much more costly projects halted natural gas combined cycle.
Also in the last 10 years other situations occurred that delayed development in the Chilean electricity should be mentioned that extended periods of drought that hydroelectric projects were striking exceptions (Ralco) that is added to the extensive international environmental campaign against the development hydroelectric projects.
Another situation that occurred in Chile was the amendment which was initiated in our power parliament of the law and not helping to boost electricity generation by the above there is a delay rational Current in electricity generation projects in general.
Luckily at this time all Chilean companies operating in that sector (Endesa, Colbún and others) all are determined to return with the design and construction of power plants both hydroelectric and building coal plants to new technology, combined cycle plants based on GNN importing natural gas (n), wind farms and even some geothermal power plants to longer term.
Note: The technology necessary for the implementation of wind farms already exist in the world with one hand sufficient maturity (Germany and Spain are countries that have numerous wind farms operating successfully).
All the above have at the moment THROUGH government support of the national energy commission and the ministry of economy or Chile is ready to catch up we can conclude that the situation in Chile is a favorable outlook.