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Tuesday, October 5, 2010

Chile: Political and Economic Conditions and U.S. Relations

Peter J. Meyer
Analyst in Latin American Affairs

In the two decades since the country emerged from dictatorship, Chile has consistently maintained friendly relations with the United States. Serving as a reliable—if not always very public—ally, Chile has worked with the United States to advance democracy, human rights, and free trade in the Western Hemisphere. Chile and the United States also maintain strong commercial ties. Trade has more than doubled to over $15 billion since the implementation of a bilateral free trade agreement in 2004, and an income tax treaty designed to boost private sector investment was signed in February 2010 and is awaiting submission to the U.S. Senate for ratification. Additional areas of cooperation between the United States and Chile include renewable energy and regional security issues.

President Sebastián Piñera of the center-right “Coalition for Change” took office in Chile in March 2010, bringing an end to 20 years of governance by a center-left coalition of parties known as the Concertación. During its time in power, the Concertación enacted constitutional changes to strengthen civilian democracy, took steps to address human rights violations that had occurred during 17 years of military rule under General Augusto Pinochet, and supplemented free market economic policies—which had been implemented during the dictatorship—with moderate social welfare programs. Most analysts credit these policies for fostering the strong economic growth and considerable reductions in poverty that have put Chile on the verge of becoming a “developed country.”

Piñera’s first six months in office have been marked more by continuity than change, as he has largely maintained the Concertación’s economic and social welfare policies while shifting the emphasis from redistribution to economic growth. His primary focus has been dealing with the fallout from the massive earthquake that struck Chile just two weeks before his inauguration. In addition to coordinating humanitarian assistance, Piñera won legislative approval for a $8.4 billion reconstruction plan. Chile weathered the global financial crisis reasonably well as a result of a counter-cyclical stimulus program enacted by the Bachelet Administration; however, the country did suffer a slight economic contraction and increase in the poverty rate. Piñera has pledged to boost economic growth to 6% annually, eliminate extreme poverty, and create one million jobs by the end of his four-year term by attracting increased investment and running government more efficiently. Other issues requiring Piñera’s attention include militant activism by indigenous groups, Pinochet-era human rights abuses, and weaknesses in the education system. According to a September 2010 poll, 56% of Chileans approve of Piñera’s performance.

The 111
th Congress has expressed interest in several issues in U.S.-Chile relations. In March 2010, the U.S. Senate and House of Representatives passed resolutions (S.Res. 431 and H.Res. 1144) expressing sympathy for the victims of the country’s February 27 earthquake and solidarity with the people of Chile. The House also passed legislation (H.R. 4783, Levin) to accelerate income tax benefits for charitable cash contributions for earthquake relief in Chile. Other resolutions have been introduced to express support for the Energy and Climate Partnership of the Americas, including clean energy cooperation with Chile (H.Res. 1526), and to honor the bicentennial of the call for independence in Chile and several other Latin American nations (H.Res. 1619).This report provides a brief historical background of Chile, examines recent political and economic developments, and addresses issues in U.S.-Chilean relations.

Date of Report: September 22, 2010
Number of Pages: 24
Order Number: R40126
Price: $29.95

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