After the quake, Chile shows its strengths

In Latin American terms, it couldn't have happened to a better country.
Pedro Dutour | Mar 4 2010 | comment  



Photo: ReutersChile is struggling with the aftermath of last Saturday’s early morning earthquake. It was estimated to be the fifth strongest in the last 100 years, with a magnitude of 8.8 on the Richter scale. So far the death toll in Chile has reached 800. The devastation affected the whole country, but especially the central and southern regions.

Half of the victims died in a tsunami that swept across 500 kilometres of the coast shortly after the earthquake. More than 350 died in the coastal town of Constitución. Between the tremors and the tsunami, more than 500,000 houses collapsed. Two million people have been affected, bridges have collapsed, roads have cracked, hospitals have been destroyed. According to Eqecat, an American company specialising in risk estimates, the cost of the damage could be between US$15 and 30 billion, which represents about 10-15 percent of Chile’s GDP.

But this was a calamity with which the most developed Latin American country, with a strong democracy and with solid institutions, can cope with. Despite some looting and violence in cities like Concepción –which was worst hit -- Chile will survive.

In a sense, the extent of the calamity in Chile was an act of God; the extent of the calamity in Haiti only weeks earlier was an act of man. When the earthquake hit Haiti, 230,000 people died. But Haiti, the poorest country in the Western hemisphere, was completely unprepared for disastrous social disruption. Corruption, theft and unemployment are part of the environment of Haiti. Chile, on the other hand, has a robust democracy and sturdy economy and its people are well educated and hard-working.

“There will be ‘looting’ in Chile this week as people struggle to survive in the ruins, but the Chilean army and police, not the US Marines, will control the situation. There will be weakened apartment blocks that abruptly collapse, but there will be inspectors on hand to help assess which ones might be safe”, commented Anne Appelbaum in the on-line magazine Slate.

“In the city of Concepción, residents of a new building that collapsed completely are threatening to take their builders to court, according to one report. The fact that they are even discussing this option implies that these apartment owners believe they have a court system that works, a legal system that could force builders to pay compensation, and a building regulatory system that is generally respected. Haiti has none of the above”, Ms Appelbaum pointed out.

In part, Chile’s relative good fortune is due to its well-managed economy. This is one of the few success stories in Latin America, thanks to a model implemented during the dictatorship of the reviled Augusto Pinochet with the help of economists trained in America under Milton Friedman. Instead of trashing his achievements, the succession of left-wing and centrist governments which succeeded him continued in the same path.

As a result, writes Bret Stephens in the Wall Street Journal, “Chileans have become South America's richest people. They have the continent's lowest level of corruption, the lowest infant-mortality rate, and the lowest number of people living below the poverty line.” In fact, Chile has just joined the rich man’s club, the Organisation for the Economic Cooperation and Development. It was the first country in South America to do so.

President-elect, Sebastián Piñera, a centre-right leader who takes power on March 11, can rely upon a Social Stabilization Fund of US$14 billion which was earned in the days of sky-high copper prices. President Bachelet had US$8 billion up her sleeve to deal with global crisis last year -- something that other Latin American economies could only dream about. In fact, Chile was the first country in the continent to exit the global financial crisis. According to the research group Capital Economics, the Chilean economy will expand by five percent this year.

“As the priority shifts from the urgent humanitarian needs to reconstruction, the strong state of government finances in Chile will facilitate these efforts”, Curtis Mewbourne, of investment group Pimco, told the BBC.

But American attempts to interpret Chile’s resilience in terms of economics are not altogether adequate. The history and character of the Chileans must also be taken into account. First of all, Chileans are more homogenous ethnically. The social tensions which have blighted the politics of its neighbours Boliva and Peru are less evident. As well, geography has made them more self-reliant. To the east are the impassable Andes; to the west, the Pacific Ocean, to the north the Atacama, the world’s driest desert; to the south, ice. So, from the very beginning of its history as an independent nation, Chileans had to fend for themselves.

At first, President Bachelet held off asking for foreign aid. As the scale of the devastation sank in, she announced that her country welcomed help. But despite the hammering taken by its infrastructure, Chile will be rebuilding itself. It’s one more demonstration that the critical variable in building a resilient society is a democratic culture which respects hard work.

Pedro Dutour writes from the capital of Uruguay, Montevideo.



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