Commentary: Earthquake might hinder Chile joining 'First World'

I hope I'm wrong about this, but I fear that the devastating earthquake that rocked Chile recently will not only leave a tragic human toll, but could delay Chile's goal of becoming the first Latin American country to join the First World this decade.

Granted, Chile already is a role model for Latin America, as the only country in the region that has reduced poverty from 43 percent of the population to 13 percent over the past two decades. But if it achieved its target of becoming a developed nation before the end of this decade, it would be an even more powerful example for the rest of the region.

In a recent interview before the earthquake, Chile's President-elect Sebastian Piñera told me that his economic plan called for turning Chile into a developed country by 2018.

"The big goal that we have set for ourselves is that by 2018, we should be the first Latin American country that would be able to say with great pride, but also with humbleness, 'We have defeated underdevelopment, we have defeated poverty,'" Piñera said.

"Our per capita income today is of $14,400, and by 2018 we want to reach $24,000, which is the threshold that separates the developed world from the developing world," he added. "If we are able to grow by 6 percent a year, which is our target, we will be able to be a developed country by 2018."

But now, with the huge losses in roads, bridges and ports caused by the 8.8 magnitude earthquake that shook the country Saturday, there are questions about whether Chile's economic targets are feasible.

Most of the damage took place in the states of Biobío, Maule, La Araucanía, Valoparaíso and O'Higgins, which include the heart of Chile's lumber, cellulose and wine industries. Together, these states account for 27 percent of Chile's economic output.

Some economists predict a post-earthquake increase in economic activity, as funds from insurance companies, government reserves, foreign aid and international loans start pouring in for the reconstruction effort. But most are skeptical about such optimistic forecasts.

While there are no official estimates of the damage, Chilean press reports say they will be of at least $8 billion. To put that figure in perspective, the head of Chile's Association of Insurance Companies told Chile's daily La Nación that insurance payments are likely to total $2.6 billion.

Earlier this week, I asked Alicia Barcena, the head of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), whether the earthquake will delay Chile's goal of becoming a developed country by 2018.

"With no doubt, there will be a negative impact in the short term," Barcena said. "We had forecast that Chile would grow by 3 percent this year, but we don't know what's going to happen now."

Asked the same question, World Bank disaster relief expert Francis Ghesquiere said Chile has enough reserves and high-quality institutions to replace its damaged infrastructure, and may even end up with a more efficient economy, but it will take time.

"Remember, Hurricane Katrina happened in 2005, and five years later not all of New Orleans has been rebuilt," he said. "Once the humanitarian phase is over, you have to start planning the reconstruction, and that can take years."

My opinion: Chile has huge contingency reserves, including an $11.2 billion Economic and Social Stabilization Fund and a $6 billion fund for post-graduate education abroad aimed at sending up to 6,000 graduates a year to pursue master's and doctoral degrees in U.S., European and Asian universities. But money drawn from these funds will keep the country from eradicating its last pockets of poverty, or from creating a critical mass of world-class scientists and engineers with Ph.D's from the world's best universities.

Chile will continue being a Latin American role model, but the earthquake may divert its energies away from investing in education, science and technology, and could delay its goal of joining the First World by 2018.

That would be a loss for all of Latin America because having a developed country in the neighborhood would be indisputable evidence that, with the right policies, any nation in the region could join the developed world.


Andres Oppenheimer is a Miami Herald syndicated columnist and a member of The Miami Herald team that won the 1987 Pulitzer Prize. He also won the 1999 Maria Moors Cabot Award, the 2001 King of Spain prize, and the 2005 Emmy Suncoast award. He is the author of Castro's Final Hour; Bordering on Chaos, on Mexico's crisis; Cronicas de heroes y bandidos, Ojos vendados, Cuentos Chinos and most recently of Saving the Americas. E-mail Andres at aoppenheimer @ herald.com Live chat with Oppenheimer every Thursday at 1 p.m. at The Miami Herald.

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