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Where Are the Opportunities for Chile to Resume a Growth Path?

September 20, 2023 por Sebastián Miller Leave a Comment


Over the last three decades, Chile has stood out by achieving the highest income per capita in Latin America and the Caribbean, in addition to the highest ranking on the Human Development Index in line with average levels of OECD member countries. Chile has also led progress related to the Sustainable Development Goals, ranking 30th worldwide.

Despite these advances, Chile still faces significant challenges in the fiscal, social, and economic areas. These challenges became clear with the public protests in 2019. However, that situation prompted significant changes in the country.

According to the Inter-American Development Bank report entitled “BIDeconomics Chile: panorama de oportunidades,” the reforms of the 1990s have put Chile in a favorable position to advance towards comprehensive development. The report also identifies seven areas Chile could focus on to definitively achieve this objective. According to the study recommendations, it is estimated that Chile could make sufficiently significant progress in a decade to become a highly developed country such as Australia.

The 7 areas with the greatest opportunities for the transformation are:

  1. Close gaps in inequality. To eliminate disparities in terms of inequity, Chile needs to address immediate challenges such as resuming a path towards overcoming poverty, providing high-quality training for employees, supporting households with adequate urban services, and promoting a more secure and unified environment.
  1. Strengthen social protection. The welfare of Chilean citizens throughout their lives, including in old age, can be achieved through reforms to the pension system, optimization of management of the health sector, and strengthening of care for dependent persons.
  1. Promote gender equity and diversity Generating opportunities for those communities that still need them, such as women in the areas of education and employment, is a reachable objective. On the path towards equality, the active contribution of men is essential. Addressing the challenge also requires giving special attention to the needs of indigenous peoples, the LGBTQ+ community, persons with disabilities, and migrants.
  1. Address climate change. In the last decade, Chile has endured the worst drought in 60 years, and in only five years it has experienced a decline of 37% in the availability of water.  Although foundations have been put in place to address this and other climate change challenges, it is necessary to advance even further policies that foster the efficient use of water, preservation of the natural environment, adoption of renewable energies, and promotion of climate-resilient strategies. 
  1. Promote an advanced productivity matrix. Progress requires support for small and medium-sized enterprises, as well as sectors already consolidated, such as tourism and agriculture. In addition, it is vital to support emerging industries with significant potential, such as green hydrogen. Whether for new or traditional sectors, innovation has become an unavoidable responsibility.
  1. Develop infrastructure to connect productive sectors. The improvement of cargo transport systems represents one of several challenges to achieve the ultimate objective: the expansion of global markets. To achieve this objective, priority must be given to executing infrastructure projects, strengthening systems, and establishing regional integration agreements.
  1. Optimize public administration. There is always room for a more efficient State. Chile has made progress in this regard, but it still faces challenges in terms of governance, the autonomy of local governments, and a regulatory framework that promotes private activity. To achieve this, it is essential to strengthen collaboration between government entities and citizen services, promote decentralized decision-making to foster development at the local level, and strengthen the regulatory framework to support the competitiveness of enterprises.

Chile has a significant opportunity to achieve full and sustainable development. To get there it is fundamental to rebuild the social pact that guarantees dignified access to health, education, housing, and pensions, leveling the playing field to take advantage of the country’s abundant human capital and natural resources. At the same time, unlocking the potential of the private sector must be facilitated, along with innovation and entrepreneurship, to stimulate economic growth.

To access additional details about the recommendations and mechanisms that will allow Chile to lead the way towards definitive development in Latin America and the Caribbean, we invite you to click on the following link to download the publication “BIDeconomics Chile: Panorama de Oportunidades.”


Filed Under: What does and doesn't work in development Tagged With: Chile, Climate Change, Gender and Diversity, growth, inequality, Infrastructure, Productivity Matrix, Public Administration, social protection

Sebastián Miller

Lead economist for Chile in the Country Department Southern Cone.

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This blog highlights effective ideas in the fight against poverty and exclusion, and analyzes the impact of development projects in Latin America and the Caribbean.

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