In any other year, Chile’s tremendous economic growth in 2010 would have been top news.
But the country’s performance was made more remarkable because of its quick recovery from an 8.8 magnitude earthquake in February, in a year where the world also grappled with a financial crisis.
“The recovery has been incredible,” Alberto Ramos, senior economist for Latin America at Goldman Sachs, told Chilean newspaper El Mercurio in December. “It has surprised everyone how strong domestic demand has been, with double-digit growth. A very strong recovery – which I believe will continue into 2011.”
The Andean nation’s dynamic economy proved its strength and stability in the face of that adversity, impressing economists so that by year end, analysts such as Joydeep Mjkerji from Standard and Poor’s were praising its “resilience.”
“We revised [Chile´s credit rating] to positive because we believe that many years of prudent economic management – particularly through adverse external shocks and natural disasters – have helped the Chilean economy become more resilient and have given it greater capacity to use countercyclical measures to cushion the impact of such pressures,” said the risk rating agency analyst in December as Standard & Poor’s raised Chile’s credit rating to positive, confirming Chile as a top country to invest in South America.
That decision bookended a big year for Chile that saw the country welcomed into the Organization for Economic Cooperation and Development (OECD). It was the 31st member of the “group of rich nations” and the first in Latin America.
The International Monetary Fund has predicted Gross Domestic Product growth of 5% in 2010 and 6% in 2011. The third quarter of 2010 produced a 7% increase in GDP compared to the same period in 2009.
The most recent Monthly Index of Economic Activity released by Chile’s central bank showed seven straight months of growth as of October 2010.
Analysts have attributed Chile´s success to the high price of copper, of which Chile produces the most in the world, along with a high level of free-trade and its special relationship with China, its largest trading partner.
In a February report by US-based think-tank the Heritage Foundation, Chile’s economy was ranked as the 10th most open in the world. A free trade agreement with Malaysia that was confirmed in November, gives Chile a foothold in the Association of Southeast Asian Nations (ASEAN).
Chile’s trade totalled US$ 87.7 billion in imports and exports in the first nine months of 2010, a 32.6% increase over the same period in 2009.
Meanwhile, on top of estimating greater growth in 2011, the IMF has backed the Central Bank’s move to raise interest rates in 2010 and the Government’s goal of limiting spending growth in 2011, saying the measures would help prevent inflation and control the appreciation of the peso.
This post is also available in Spanish