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Friday, January 4, 2013

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



Peter J. Meyer
Analyst in Latin American Affairs

Chile has consistently maintained friendly relations with the United States since its transition back to civilian democratic rule in 1990. Serving as a reliable but independent ally, Chile has worked with the United States to advance democracy, human rights, and trade in the Western Hemisphere. Chile and the United States also maintain strong bilateral commercial ties. Total bilateral trade in goods and services has nearly tripled to $29.2 billion since the implementation of a free trade agreement in 2004. Additional areas of cooperation between the United States and Chile include supporting regional stability and promoting clean energy development. 

Political Situation 


Sebastián Piñera of the center-right “Coalition for Change” was inaugurated to a four-year presidential term in March 2010. Piñera’s electoral victory was the first for the Chilean right since 1958, and brought an end to 20 years of governance by a center-left coalition of parties known as the Concertación. Piñera’s coalition lacks majorities in both houses of the Chilean Congress, however, and he must secure the support of opposition or unaffiliated legislators to advance his agenda. This need for cross-coalition appeal has contributed to considerable policy continuity. While Piñera has won legislative support for a variety of policy reforms, he has struggled in dealing with a series of popular protests over issues ranging from energy policy to the education system. The Chilean populace has resorted to such tactics to demonstrate its increasing dissatisfaction with the country’s political system, which it views as unresponsive to citizen demands. As the generalized sense of discontent has spread, Piñera’s approval rating has steadily declined. In September 2012, 32% of Chileans approved of Piñera’s performance in office while 57% disapproved. Although the majority of the public also disapproves of the opposition Concertación, it outperformed Piñera’s coalition in municipal elections held in October 2012. 

Economic Conditions 


According to many analysts, Chile has the most competitive and fundamentally sound economy in Latin America. In 2011, the country had a gross domestic product (GDP) of $248 billion and a per capita GDP of $14,403—the highest in the region. Chile’s economic success stems from policies implemented over several decades that have opened the country to investment, secured access to foreign markets, and mitigated the effects of external shocks. In recent years, this solid policy framework has helped the Chilean economy weather the global financial crisis and a massive February 2010 earthquake. After a 0.9% contraction in 2009, the Chilean economy grew by 6.1% in 2010, 5.9% in 2011, and is projected to grow by 5.0% in 2012. Strong economic growth—paired with targeted social assistance programs—has also contributed to a significant decline in the poverty rate, which fell from 38.8% in 1989 to 14.4% in 2012. High levels of inequality have persisted, however, leading to some popular discontent with Chile’s otherwise strong economic performance. 

Congressional Action 


Congress has expressed interest in a variety of issues in U.S.-Chilean relations over the years. The 113
th Congress could take up matters such as the U.S.-Chile bilateral income tax treaty, which was signed in 2010 and was submitted to the U.S. Senate for ratification in May 2012 (Treaty Doc. 112-8). Ongoing negotiations over the proposed Trans-Pacific Partnership (TPP) trade
agreement, which includes Chile, the United States, and at least nine other nations in the Asia- Pacific region, may also attract congressional attention.

This report provides a brief historical background of Chile, examines recent political and economic developments, and considers current issues in U.S.-Chilean relations.


Date of Report: December 19, 2012
Number of Pages: 20
Order Number: R40126
Price: $29.95

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