Economics Essays – The Chilean History

The Chilean History

The History of a state is a really good manner to understand different facets of that state ; if we want to grok the economic sciences and manner of making concern of a specific state so we study the history of it. TheHistory of Chileis a good point to get down to hold of import penetrations on how Chile does concern and how it behaves economically.

The Chilean History can be divided in 10 periods ; these periods include events related to different folks bing in the Chilean district before the Spaniards Arrival and one of the most of import events in Chilean History: the military putsch of Augusto Pinochet Ugarte.

The First Period includes Prehistory, The European Expansion and The Conquest ; this period is from the twelvemonth 10,000 b.C to the twelvemonth 1599. We can indicate some high spots for this period:

The Incas, one of the most of import Indian folk in South America settled in the district which subsequently would go Chile before the Spaniards arrived. During 1470 they built an administrative centre in that district. Subsequently on, by 1532 Atahualpa, the Inca emperor is caught by the Spaniards and after that he is assassinated by them. Then Spanish Crown sends Diego de Almagro who would govern over that district which would be named Nueva Toledo by the Spaniards. Along with Almagro came Pedro de Valdivia a lieutenant of Francisco Pizarro. Valdivia founds the metropolis of Santiago in 1541 and is named Governor of that metropolis.

In 1550 the metropolis of Concepcion is founded and there is an Indian rebellion which would stop with the decease of Pedro de Valdivia. By this clip many English plagiarists try to steal from different Chilean metropoliss but they don’t win.

This period would stop with the reaching of the first Catholic Priests.

The Second Period includes The Colony and the Centuries XVII and XVIII ( from 1600 to 1800 ) and during this period it is created a lasting ground forces for the settlement but indians’ rebellions continue. Jesuits Catholic priests are expelled from the district which by this clip is separated by the Spaniards from Peru. A violent temblor destroys Santiago.

The 3rd Period is a really of import one in the history of Chile because it includes the Independence and the Organization or the old ages between 1801 and 1830. Here, the battle for independency is caused by the overthrew of the Spanish male monarch Ferdinand by Napoleon’s brother Joseph. Chile establishes the first national junta which states that Chile is free from Spain, so freedom of trade followed. The first flag and the first National Congress are created. ( Universidad de Chile )

In 1813 begins the Fight for Independence and Governor Jose Miguel Carrera regulations Chile but so he suffers three putschs d’etat ; he is captured by Spanish Armies and he is assassinated. Spanish General Mariano Osorio regulations Chile as governor.

A new Chilean ground forces for independence is commanded by Bernardo O’Higgins and Jose de San Martin ( hero in Argentina in the battle for independency ) ; Spanish ground forces is defeated and O’Higgins regulations Chile as Supreme Leader. After this, in 1818 Independence is declared. A few old ages subsequently Bernando O’Higgins quits as the leader of the motion.

Throughout this period the first “ embassador ” of the U.S.A. arrives in Chile: Joel R. Poinsset and the plants for making the first fundamental law start. The National Library is founded

The 4th period represents the Conservative Ruling ( old ages between 1830 and 1860 ) and here the inchoate province of Chile is threatened by many enemies since it was still excessively weak. A war between the Peruvian-Bolivian Confederation under the orders of Andres de Santa Cruz and Chile starts due to dissensions in trade and revenue enhancements. The Confederation is defeated by the Chilean ground forces.

In this period is created the Chilean University and besides Spain acknowledges Chilean Independence in 1844.

Chilean authorities starts being influenced by the broad economic idea.

During the 5th period which includes the Expansion and the Parliamentarian Stage ( 1861-1891 ) , a new war against Spain starts in 1865. Boundary lines in the frontier with Bolivia are created and a reform in the fundamental law prohibits immediate reelection of the President. Salt parts are discovered in the Antofagasta zone and in 1873 the Valparaiso Stock Exchanged is established. Womans are allowed to go to the Chilean University.

Chilean business communities working the salt mines in Bolivia are charged more revenue enhancements by the Bolivian Government ; the Bolivian Government takes control of the Chilean companies working the salt mines ; therefore The War of the Pacific begins with Peru and Bolivia. Chile wins the war in 1882 and expands its territory due north.

In this period Chile sets the boundary lines with Argentina and in 1888 Jose Manual Balmaceda becomes the Chilean President. Congressmen and Balmaceda don’t agree on the salt companies’ statute law ; the Civil War Begins and Congressmen win, so Balmaceda quits as president and after that he commits self-destruction. ( Biografia de Chile )

In 1888 the Catholic University if Chile is created.

The Parliamentarian Chile is developed during the 6th period or the old ages between 1892 and 1925. In 1892 the Liberal-Democrat Party is born and jobs between Argentina and Chile for their shared boundary lines begin. The King of England Judgess the jobs and they are solved. In this period is established the Chilean Bank and Pablo Neruda is born. Besides, the Chilean Students Federation and the Chilean Workers Federation are created.

In 1912 the Workers Socialist Party is established and in 1922 the Chilean Communist Party is created and work stoppages in the mines start and the Army asks the President Arturo Alessandri to go forth the presidential term ; Alessandri returns to govern Chile but he quits after a short piece.

The 7th period is full of turbulency for Chile because it includes from the Anarchy to the Extremist Governments ( 1926-1951 ) : Chilean authorities is unstable ; Carlos Ibanez makes current Chilean President Figueroa to go forth presidential term and so becomes the new President. He suffers a putsch d’etat in 1931, following president ( Juan Esteban Montero ) besides suffers a putsch d’etat. Army regulations the state and The Socialist Republic of Chile is established. Arturo Alessandri returns as President and 1933 is created the Socialist Party of Chile. In 1944 Chile establishes dealingss with The U.S.S.R. ( Universidad de Chile )

In 1949, the Chilean authorities fires all its Communist workers ( near to 6000 people ) .

Populism and Socialism come in the eight period ( 1952-1973 ) and this is one of the most of import chapters in Chilean History. In 1952 the Chilean Women acquire to vote on presidential elections. The Workers Unions grouped in an organisation ( CTU ) and organize work stoppages in the state. The Democrat Party is founded. The Socialist Party of Chile and Popular Socialist Party go one. The Communist Party gets back its legality. Assorted pupil and workers motions begin.

The Andin Pact is created and signed by Bolivia, Colombia, Chile, Peru and Ecuador and creates advantages for all the states.

In 1970 Salvador Allende becomes President and starts to nationalise industries like the Copper Industry and Telecommunications Industry.

Fidel Castro visits Chile.

In 1973 Several people is against Allende’s Government and Allende’s staff. A joint work stoppage of coach drivers, bargainers, physicians, mineworkers and bank representatives paralyzes the state.

Military putsch led by General Augusto Pinochet ; Allende commits suicide in The National Palace La Moneda.

A Military Group led by Pinochet regulations the state and starts working on a new fundamental law. The Marxist Party is banned and many human rights misdemeanors are made during Pinochet’s opinion.

After the military putsch the 9th period starts and it represents the Military Government ( from 1974 to 1989 ) . Augusto Pinochet becomes the Chilean President. This period features different economic steps which will do Chile to be one of the top economic states in Latin America. Economic development is achieved. Different Human Rights Organizations start to look into the human rights misdemeanors under Pinochet’s authorities. In 1988 a plebiscite denies another term for Pinochet. Patricio Aylwin becomes president. ( Universidad de Chile )

The Tenth Period is the Current History ( 1990-2007 ) .In this period three new presidents are elected: Eduardo Frei Ruiz-Tagle, Ricardo Lagos ( Socialist Party and Party for the Democracy ) and Michelle Bachelet.

In 1998 an International Court seeks Augusto Pinochet for race murder.

Chile becomes a friend of international trade and marks free trade understandings with Mexico, Canada, Central America and enters to Mercosur. ( Biografia de Chile )


-Republic, 3 powers: Executive, Legislative and Judiciary.

Executive Power: President of Chile ( current is Michelle Bachelet ) . President can non be elected for governing on back-to-back periods. President elected every six old ages ( although the Constitution allows cut downing the term from six to four old ages ) .

Legislative Power: Bicameral Congress which meets in the metropolis of Valparaiso. Deputies elected every four old ages and Senator every eight old ages. “ Congressional elections are governed by a binomial system that rewards alliance slates. Each alliance can run two campaigners for the two Senate and two Deputy seats apportioned to each electoral territory. ” ( Global Edge )

JUDICIARY POWER: “ Independent, includes a tribunal of entreaty, a system of military tribunals, a constitutional court, and the Supreme Court ” . ( Global Edge )

-Constitution approved in 1980 ; amended in 2005 to extinguish the places of Senators for life and appointed senators and to allow Presidential authorization to take governments in the armed forces and to cut down the presidential term from six old ages to four old ages.


Of the South American states, Chile was among the last to be populated and established as a state, in the modern sense, as we understand it. The state was ruled originally as portion of the Spanish Empire and therefore the influence of democracy can be seen all over. South American states by and large do non hold a long tradition of democracy in the modern sense. But we must retrieve that democracy even in the Western World, whether of the British cabinet System or the American Presidential System, is of relatively recent beginning, in the context of the history of adult male and human civilisation.

Authoritarian governments ( Authoritarian Legacies ) by and large ever backed by force have been governing states such as Chile during the past 3 or 4 centuries of all time since the Spanish conquering. Therefore, the people in the state were accustomed to an autocratic government, one succeeding another, from clip to clip. Furthermore the societal system of ownership of land and other resources were with a few households and therefore the societal order was of feudal character. During much of the twentieth century states such as Chile, as besides its Latin American neighbours, were mostly under the influence, and one might even state under the hegemony or strong influence of the US of America.

With the rise of the United States as a ace power, the single European states except Britain, France and Germany were no longer powerful. Spain and Portugal, the early innovators in South America could no longer claim to be major powers now. Furthermore, the Monroe Doctrine ( The Monroe Doctrine ) propounded by the United States, wherein any escapade by any European power in South America would be considered as aggression, efficaciously kept off any efforts at escapade by the European powers. Thus the United States became the major and make up one’s minding influence in South American affairs.

Coming to more recent times in 1973 following the overthrow of President Allende, who showed left-of-center or socialist inclinations ( Chile under Allende ) , non to the liking of the US, Gen. August Pinochet grabbed power and ruled Chile with an Fe manus boulder clay 1981. During this dark stage in Chilean history, human rights were viciously suppressed and 1000s were tortured and killed, civil autonomies were wholly curbed and although he brought about some economical reforms, presuming a free manus, the violent death of democratic establishments did irreversibly injury to Chile and its people. Unfortunately the US supported Pinochet and the military junta. Ultimately in 1980- followers in a plebiscite where the Chilean people were asked to sign a new fundamental law ( Chile under Pinochet ) . By now Pinochet besides softened his barbarous steps merely before the visit of Pope John Paul to Chile in 1987.

Chile is mostly a Catholic state and therefore the Catholic Church merely could non be ignored. Pinochet held a referendum where the bulk 66 % voted against him. There was an election in 1989, Pinochet left the Presidency in 1990 and transferred power and Patricio Aylwin became the president in 1989. Finally, Michelle Bachelet, an complete lady, who qualified as a physician in medical specialty from Germany became the President and it appears, that a big grade of democracy has at long last returned to Chile, at least in theory.

While on this it may be mentioned that “ democracy “ of all time since the yearss of US President, the late Abraham Lincoln, who called it authorities of the people, by the people, for the people has had a charming consequence in the heads of people ( Gettysburg Address ) . Democracy lends legitimacy and reputability to a government. Democracy lends legitimacy and reputability to the political system. There is something particular and magnetic about democracy in its entreaty to the human head. That is why even states which are non democratic frequently like to depict themselves as democratic in their very names, illustration, “ the German Democratic Republic ” in the past, before fusion of Germany. Today we have “ the Peoples’ Democratic Republic of North Korea ” , where the really reference of the word democracy lends reputability. Surely the potency of a state can be more to the full realized if existent Democracy prevails, and until that happens ; the potency of the state and its people will ne’er be realized. ( Democratic democracy )

Under President. Michelle Bachelet it appears Chile will come on and stabilise as a democracy in the existent sense let go ofing the originative energies of its people and recognizing its full potency in economic societal footings. The Catholic Church and the peoples’ commitment to it, mostly, may besides be said to be one of the stabilizing influences in Chile. Present twenty-four hours Chile can be said to be rather stable for economic investings although it must be said the overbearing influence of the United States is still really much there, therefore economic colonialism is bound to be there for some old ages to come.

Finance, Investment, Currency subdivision

For decennaries Chile has maintained impressive growing rates. It wasn’t until 1999 when they eventually began to see a downswing due to adverse planetary economic conditions. This downswing remained until 2003 when it managed to draw off 4.0 % existent GDP growing. By 2004 Chile managed a GDP growing of 6.0 % , and began falling back to 4.0 % by 2005 ( The Encyclopedia Britannica online ) By the terminal of 2007, GDP is expected to increase back to around 6.0 % .

Government’s function in the economic system is limited largely to ordinance. It is merely in control of a few choice concerns such as CODELCO, which is one of the universes Cu giants. Chile has a strong committedness to free trade and welcomes foreign investings of all sorts. It is high domestic nest eggs and investings that helped force Chile’s economic system to an mean growing rate of 8.0 % in the 1990s. ( The Encyclopedia Britannica online ) The national pension system ( AFP ) in affect encourages domestic nest eggs, and contributes to a domestic nest egg rate of around 21 % of GDP.

Although Chile has a relatively higher GDP and more stalwart economic system compared to most other Latin American states, Chile has one of the most unevenly distributed wealth sections in the universe. The top 10 % in footings of richest people in the state history for approximately 47 % of Chile’s wealth. Income is distributed between the upper economic system bracket, the in-between bracket, the lower center, the lower bracket and the highly hapless at 6.2 % , 15 % , 21 % , 38 % , and 20 % severally ( The CIA World Factbook ) .

Chile’s mark rising prices rate sought by the independent Central Bank is between 2 % and 4 % yearly. Chile has non had an rising prices rate of over 5 % since 1998. The rapid grasp of the Chilean peso against the U.S. dollar has helped assistance in maintaining rising prices at a lower limit.

The entire foreign direct investing ( FDI ) was around $ 3.4 billion in 2006. This figure was up 52 % over 2005. Although figures are up, 80 % of the FDI from 2006 went toward merely four different sectors which include: electricity, gas, H2O and excavation. The Chilean authorities has made efforts at placing and advancing new industry sectors and encourages domestic and foreign investings in R & A ; D. In hopes to accomplish this, it has created what every bit known as the Council on Innovation and Competition and has issued some revenue enhancement reforms. As of 2006, Chile merely invested about 0.6 % of its GDP in R & A ; D, of which two-thirds was authorities disbursement ( The Encyclopedia Britannica online ) .

The Government of Chile besides encourages the usage of Chile to multinational corporations as an “ investing platform ” . Foreign Investment Law in Chile warrants foreign investors the same rights as Chileans and grants entree to the official foreign exchange market for the corporations to direct place their net incomes and capital.

The fiscal sector in Chile has grown quickly in recent old ages. This can be attributed to the banking reform jurisprudence approved back in 1997 that expanded the range of allowable foreign activity for Chilean Bankss. Over the last 10 old ages or so, there has been an debut of new fiscal tools in the signifier of place equity loans, currency hereafters and options, factoring, renting and debit cards which has been accompanied by the increased usage of conventional tools such as loans and recognition cards. Chile’s investing capital can be attributed to the approximately $ 70 billion worth of assets in Chile’s private pension system.2 Furthermore, harmonizing to the S & A ; P’s A+ recognition evaluation, Chile carries one of the highest recognition evaluations in Latin America. The three ways Chile raises financess abroad to finance Chilean domestic investing are: bank loans, issue of bonds, and selling stocks on the U.S. market through the American Depository Receipts ( ADRs ) . Chile’s authorities requires itself to run a financial excess at least 1 % of GDP. By 2006 this excess was $ 11.3 billion, which was about 8 % of GDP. Foreign debts in Chile are continuously being paid down and by 2006, public debt was merely 3.9 % of GDP ( The CIA World Factbook ) .


Basic Facts about Chile’s trade environment:

Chile has a really contributing environment for trade. Its substructure, economic policies, openness towards foreign trade and investing, and steady growing has made it a really attractive market. In fact, the economic growing of Chile in 2006 was every bit high as 4.3 % and its jutting growing rate for 2007 is over 5 per centum. ( Making Business in Chile ) On January 1st, 2004, the Free Trade Agreement between U. S. and Chile was signed, which allowed 97 % of U. S. exports are allowed to come in Chile responsibility free. In add-on, The U. S. is the largest investor in Chile and histories for 25.7 % of all foreign direct investing. ( Making Business in Chile )

All of Chile’s positive properties listed supra do it a really attractive foreign market. One obstruction remains nevertheless, and that is high grade of competition. This is because Chile’s comparatively openness to merchandise and investing has encouraged many foreign houses. Chile has trade understandings with more than 50 states and even today seeks new trade understandings. This leaves the challenge for a U.S. house seeking to make concern in Chile is in viing with other foreign houses. ( Making Business in Chile )

Deprecating Dollar:

A depreciative currency is ever seen as a good mark for a country’s trade because aliens find it cheaper to purchase its goods and services. Similarly, the progressively depreciative dollar is a good mark for U. S. exporters. Chile will see the deprecating dollar as an advantage and may seek to increase its exports from the U. S. Thus, the trade between U. S. and Chile is expected to turn even more. ( Making Business in Chile )

Price fight:

Price fight is a major issue while runing in a Chilean economic system because the being of Korean or Chinese houses has established competitory pricing in the Chilean market. When it comes to specific merchandises such as electronic goods or heavy machinery, nevertheless, consumers in Chile prefer more reliable and expensive U. S. or European merchandises. Pricing, quality, lastingness, engineering are really of import standards one needs to see when 1 is making concern in Chile. ( Making Business in Chile )

Open Trade Policy

The best thing about the Chilean trade policies is that foreign houses enjoy the same protection as local houses. This is an of import facet that foreign houses can non afford to disregard when they invest in a state or do concern with it. in agribusiness nevertheless, some exclusions do apply. ( Making Business in Chile )

In the instance of agribusiness, for merchandises such as wheat, wheat flour and sugar, duties are imposed and will go on for a 12-year passage period. Chile besides imposed a Luxury revenue enhancement on cars. By cutting down the rate by a little sum every twelvemonth, it was wholly removed on January 1 2007. ( Chile ) Other points such as spirits, beer, vino, mineral H2O, and soft drinks, Chile imposes an ad valorem revenue enhancement, which is a revenue enhancement based on the existent value of the point ( ad valorem revenue enhancement ) . There are besides revenue enhancements on points such as gold, jewellery, cherished rocks.

Corruption-free Business environment

Corruptness in Chile is really rare. It’s concern environment is really crystalline and is straightforward. This leads U. S. and other foreign houses to happen it easy and hassle-free to make concern with Chile. ( Making Business in Chile )


Chile is Latin America’s most stable and attractive market. Furthermore, its turning economic system and unfastened trade environment invite many foreign investors and concerns around the universe. ( Making Business in Chile )


When it comes to going and transporting between Syracuse and Chile, The distance from Syracuse, NY, USA to the Chilean commercialism centre, Santiago, Chile is 5302 stat mis ( City Distance Tool ) . Delta Airlines offers one-stop flights from Syracuse, NY to Santiago Chile for around $ 1500 unit of ammunition trip. The entire travel clip is about 15 hours, 10 proceedingss. ( Your Flight to Santiago, Chile ) . The United States Postal Service offers dependable mail service to Chile, and cost is comparatively low compared to environing states. A six ounce envelope would be $ 5.40, and a 10 lb bundle would be $ 37.00 ( Postage Rate Calculator ) . Unfortunately, Chile is non a preferable location for transit companies such as UPS, and a 10 pount bundle would be $ 279.19, and take 2-4 yearss to transport ( Calculate Time and Cost ) . This suggests that if we were to make concern in Chile, we would desire to either green goods merchandises in Chile and the environing countries, or else we would transport cargo in majority. Chile does bask 6,435 kilometer of coastline, offering chances for transporting chances in add-on to air conveyance ( CIA World Factbook ) . Fortunately, Chile has been seeing a batch of growing in transportation and air conveyance services, which shows merely a lessening in costs and easiness of transit for the hereafter ( EIU ) . Chile has eight ports, and includes 258 airdromes, 79 of which have paved tracks. Chile besides offers 79,605 kilometer of roadways ( 16,080 of which are paved, and 407 kilometer of freewaies ) , and 6,585 kilometer of railroads. ( CIA World Factbook )

Harmonizing to the EIU, over 50 % of the population resides straight in the Santiago and Valparaiso metropolitan country, ( EIU ) which suggests internal transit and distribution would be comparatively simple. Of the seven major metropoliss in Chile, each are within five hr flight to Santiago, 120 hr thrust, and 84 hr train. The train system is limited by the states land, but is easy connected to several of the major metropoliss such as Puerto Montt, Concepcion, and Arica. In add-on, train service and coach service are available between Brazil and Chile, and so on from Brazil to Ecuador. Chile besides has the Panamerican Highway which crosses most of the state, and offers roads in reasonably good status. ( )

Chile is located at the southernmost tip of Latin America. Unfortunately, this places it out of the way of most supply concatenation lines. In footings of location, Chile is comparatively close to other states developing industry, such as Brazil, which does offer some chances for exported production and cooperation among Latin American operations, if there was an involvement to spread out outside of Chile merely. ( EIU )

Entrance Scheme

In analysing Franklin R. Root’s Entry Strategies for International markets, we are able to set up external and internal factors act uponing the entry manner determination. There are five chief methods for market entry, harmonizing to Root. These include Indirect and Agent/Distributor Exporting, Licensing, Brand/Subsidiary Exporting, Equity investment/Production, and Service Contracts.

By analyzing Root’s schemes, we believe that in relation to Chile, there are high gross revenues potencies. In add-on, we find that Chile has comparatively low production costs, broad import policies, great geographical distance, a Dynamic Economy, and Liberal Exchange controls. In add-on, while there is surely dissatisfaction with the current president, overall there is low policical hazard. Last, in relation to the US dollar, the Chilean Peso has dropped from 750 Pesos to 506.45 Pesos in five old ages ( Currency Converter ) . In relation to home state factors, the market in Syracuse is comparatively little. Production costs are highly high. There is besides possible fomr strong export publicity. Internal factors include Differntiated merchandises, and a high committedness for the company. Due to these facts, we believe that the market would by and large prefer Branch/Subsidiary Exporting or Equity Investment/Production. Roots research suggests that Equity Investment/Production is likely the better option of the two.


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