In a region racked by political unrest, economic crisis and falling standards of living, Chile remains, remarkably, a country that works. In an era when many traditional political parties have fallen into disrepute and few heads of state entertain any hope of being re-elected, the same center-left coalition has governed Chile since democracy was restored in 1990. The gap between the haves and the have-nots has changed little since Pinochet was voted out of office, and unemployment is on the rise. But the percentage of Chileans living below the official poverty line has been cut in half, the economy’s vital signs remain healthy and the country is in most respects the envy of its neighbors. “There remains much to be done,” says Sergio Bitar, a former senator who held the post of mining minister when Allende was toppled by Pinochet in a bloody 1973 military coup. “But these past 12 years have been the best years in the history of the country.”
The outside world has endorsed that view. The Economist Intelligence Unit recently rated Chile as the most attractive country for foreign investment in all of Latin America, ahead of Mexico and Brazil. A survey of 91 countries conducted by the Berlin-based Transparency International organization included Chile among the 20 nations with the lowest levels of corruption. The country’s image as a stable democracy with an open economy has paid off: last year alone, foreign companies invested $5.5 billion, a 49 percent increase over 2000. “What Chile did in essence was to sit down and figure out what should be done to make the country more competitive,” says U.S. Ambassador William Brownfield. “They have successfully marketed themselves as an attractive place to invest, do business and trade.”
Few other Latin American countries enjoy a similar reputation abroad. And as several economies in the region swoon, a sense of resentment and betrayal is spreading across the hemisphere. In the early 1990s a host of governments embraced the Washington Consensus, a model of economic growth based on free trade, fiscal discipline and the privatization of state-owned enterprises. Latin America was promised open U.S. markets for its exports and greater access to lending institutions in exchange for acceptance of the neoliberal gospel. But when financial crises rocked Mexico and Southeast Asia in the mid-1990s and the worldwide economic boom later ran out of gas, the foreign loan pipeline dried up and cash-strapped countries like Argentina were left to fend for themselves. Politicians who once touted neoliberal policies have publicly recanted, and an angry mood was on display at a summit of South American presidents in Ecuador last month. “We are fed up with rhetoric,” said the host country’s foreign minister, Heinz Moeller. “I have received so many slaps on the back from the United States that it’s begun to hurt. Offers are worthless, what counts is action.”
Even Latin America’s showcase country has felt the sting of broken promises. Chile opened talks with the United States over a free-trade treaty in the early years of the Clinton era, but negotiations have been stalled for years awaiting an explicit commitment from the U.S. Congress not to amend any final accord with Santiago. That commitment finally arrived last week, when the Senate joined the House of Representatives in approving Trade Promotion Authority legislation. It will allow the Bush administration to complete trade deals with Chile and other countries without fear that Congress will tinker with the terms. That doesn’t mean that U.S. legislators will pass every trade accord placed before them, but they can’t meddle with the particulars.
In the meantime, the Lagos government signed a similar trade accord with the European Union last May. The Chileans are moving ahead on other fronts, too: the Lagos government has opened discussions with South Korea and hopes to wrap up a trade agreement with New Zealand in the near future. “It’s a shame that the Europeans have taken the lead instead of the United States,” says Finance Minister Nicolas Eyzaguirre. “We’ve been in line for so many years, and there is no reason to postpone a free-trade agreement with Chile.”
The backlash against “el modelo” has not yet surfaced in Chile, in part because the economy is managing to weather the global slump. The country’s gross domestic product is likely to increase by about 2.5 percent this year. That may seem a modest number by the standards of the 1990s, but it is respectable in comparison with the rest of Latin America, which as a whole is expected to shrink by nearly 1 percent in 2002. Chile posted a $1.5 billion trade surplus last year, and while copper still accounts for more than a third of all exports, the aggressive marketing of commodities like wine, salmon and paper products has insulated the country somewhat from price swings in the copper market. The harsher effects of neoliberal policies have been tempered by increased social-welfare spending. University student enrollment has more than doubled since 1990, and the number of free meals served in public schools each day has risen dramatically. “Like any other modern country, Chile has a market economy, but it doesn’t have a market society,” President Lagos told NEWSWEEK in an interview. “Workers in Chile realize that the country’s growth has benefited them.”
The depression that is devastating Argentina has left Chile largely unscathed. The so-called tango effect has sent the Brazilian real plummeting in recent weeks and triggered a round of capital flight from Uruguayan banks. But apart from some local companies that invested heavily in Argentina’s electricity sector, Chile has not felt any significant fallout from that country’s economic meltdown. A conscious decision to diversify the country’s export markets deserves much of the credit. Santiago chose to limit its involvement with the Mercosur trading bloc, and Argentina ranks far down the list of markets for Chilean exports.
Not all of Chile’s 15 million citizens have shared equally in the fruits of the country’s economic expansion, however. Joblessness is officially estimated at about 9 percent, but independent experts say the number of Chileans who are either out of work or underemployed is closer to 15 percent. The decision to throw open the doors of all Chilean industries to foreign capital has hit trade unions especially hard. Thousands of unionized workers were laid off throughout the 1990s as local companies were driven out of business by an influx of cheaper manufactured goods from Brazil and other countries. Others saw the gap between their salaries and the minimum wage shrink to less than $15 a month. Employees earn less in real terms today than they did six years ago, according to Jose Ortiz of the Central United Workers labor federation.
The inability of successive democratic governments to narrow the gap between rich and poor is a source of particular concern. While the economy has doubled in size since the early 1990s, nearly two thirds of Chile’s national income remains concentrated in the hands of the most affluent 20 percent of the population. Government officials counter that only one in five Chileans lives below the poverty line, a vast improvement over the 1980s when nearly half of the population fell into that category. But independent economists reject the official poverty line of $60 per month as artificially low. In reality, says Marcel Claude of the Terram Foundation, a Santiago think tank, Chile has the most skewed distribution of wealth in Latin America after Brazil. “We can no longer use the same criteria for measuring poverty that were used 20 or 30 years ago,” argues Claude, a former central bank official. “When you take into consideration other factors like the quality of housing and air pollution, most Chileans lack the necessary means to lead a dignified life.” Left-wing critics latch onto such arguments as evidence that the ruling coalition–composed of the Christian Democrats, the Socialists and two other parties–has largely preserved the system inherited from the Pinochet regime.
But in many ways today’s Chile is a very different place from the bitterly divided society ruled by Pinochet. The mass demonstrations that helped engineer his defeat in the 1988 plebiscite are a thing of the past, and no general strike has taken place since the restoration of democracy. The polarization of the Pinochet era has been replaced by a spirit of consensus. The televised images of looting and violent protest that engulfed much of Argentina last December are difficult to imagine on the streets of Santiago.
Can other Latin American countries duplicate the Chilean model? In most instances the answer is probably no. Chile’s leaders have steered clear of the foreign debt trap that has transformed larger and far more richly endowed countries into virtual hostages of the International Monetary Fund. Unlike some of his fellow military autocrats, Pinochet resisted the temptation to loot the national treasury, thereby upholding a tradition of probity that pre-dated his seizure of power and carries on to this day. And if there is such a thing as national character, most Chileans are imbued with values like diligence, punctuality and respect for the law. “We are conservative in that respect,” explains the ex-senator Sergio Bitar. Whatever the mix of politics, economics and culture, Chile’s success recipe is very much its own.
title: “Open For Business” ShowToc: true date: “2022-12-17” author: “Latosha Yon”
To Russia, the Bushehr project is the symbol of its ambition as an exporter of nuclear technology. To Western intelligence officials and diplomats, it’s the beginning of a nightmare of proliferating nukes. Although Iran claims it’s only building an innocent electrical-power plant, Western officials worry that Russia’s nuclear know-how and materials could easily be diverted to weapons. Last week the United Nations’ International Atomic Energy Agency gave them more cause for worry. Inspectors examining equipment at a nearby nuclear facility discovered traces of highly enriched uranium–the stuff of bombs. The evidence, though circumstantial, raises the possibility that Iran may already be well on its way toward joining the nuclear club.
Russia is adamant in its refusal to pull out of Bushehr. Just last week U.S. State Department officials left Moscow after failing to persuade the Russians to abandon the project. They were disappointed, but not surprised; Russia has resisted similar entreaties for years. The Atomic Energy ministry, known as Minatom, is in fact hoping that Bushehr will serve as a harbinger of business to come. Out of the crumbling Russian nuclear industry, Minatom is engaged in an aggressive campaign to market Russian nuclear know-how to developing countries–several of which may be eager to acquire dual-use technology to secretly build nuclear weapons on the cheap.
Russian atomic scientists are already helping China and India build nuclear plants. They’re bidding on a reactor in Finland. They’re considering building a research reactor in Burma and have already trained 300 Burmese scientists. They’re also in talks with Bulgaria, Cuba, Indonesia, Egypt and Syria. Several African countries are interested in a controversial new technology for nuclear plants that float in the ocean–a prospect that keeps proliferation experts awake at night. “Minatom does not seem to worry much about the possibility that someone might break into these reactors and take the fuel,” says Cristina Chuen, a researcher at the Center for Nonproliferation Studies in Monterey, California.
Russia’s nuclear ambitions grew out of the collapse of the Soviet economy. Even though Minatom retained responsibility for a large and deteriorating network of nuclear power plants in the early 1990s, its budget shrank to a fraction of its Soviet-era peak. To obtain much-needed currency, the ministry, which employs tens of thousands of nuclear scientists, started exporting nuclear technology to former Soviet satellite nations. At first, the United States seemed to be making headway in limiting the spread of Russia’s nuclear know-how. The Kremlin put a stop to all Russian nuclear cooperation with North Korea partly to assuage U.S. concerns over Kim Jong Il’s rising nuclear ambitions. A year later the United States undid that diplomacy when it struck a deal of its own with Pyongyang to build a light-water reactor, in return for a promise to halt its homegrown nuclear program. “Minatom went clean and then the U.S. turns around and delivers a light-water reactor to a country with a dubious stature,” says Aleksandr Pikayev of the Carnegie Center in Moscow. That, he says, goes a long way toward explaining Minatom’s current “hardened attitude.”
The Russian government also has a lot riding on Minatom’s success. Russia’s burgeoning nuclear industry is one of the economy’s few bright spots. Last year Minatom took in $2.6 billion in nuclear export revenues and expects $3 billion this year. Bushehr alone will account for $800 million and about 20,000 Russian jobs. Last year Minatom deputy Bulat Nigmatulin told reporters that Russia may build 10 nuclear reactors in foreign countries over the next 10 years. In addition to five reactors already under construction in China, Iran and India, the other five could be finished by 2010 at $800 million to $900 million apiece. Says Malyshev: “It’s absolutely normal when a country creates a high-class product to sell it to other countries.”
But what if that product can be used for nefarious purposes? CIA analysts in a January report put Russia at the top of the list of suppliers of the technology of weapons of mass destruction and advanced conventional munitions, followed by North Korea, China and, to a limited degree, some suppliers in Western countries. Last week’s revelation in Iran is sure to turn up the heat. The U.N. team found the traces of highly enriched, bomb-grade uranium at a remote installation outside Deh-Zire, a village near Natanz, where the Iranian government has launched a uranium-enrichment program of its own. (It claims the fuel is for the Bushehr plant.) Iranian officials argue that traces of highly enriched uranium had been deposited on the equipment when it was imported. But Western experts aren’t buying it. A Tehran-based Western diplomat told NEWSWEEK that the enrichment site has underground facilities that could house tens of thousands of centrifuges–enough to make fuel for the eight reactors Iran says it wants to build, or a whole lot of bombs. And much of them are hardened against bombing strikes, which “obviously gives us cause for concern,” says the diplomat.
Russian experts insist that Bushehr’s light-water reactor would be useless for producing weapons-grade material. But U.S. officials and scientists at Lawrence Livermore Laboratory disagree. Over several years, they insist, Bushehr could produce “80 to 100 plutonium-based nuclear weapons.” Will Israel or the United States take out the plant with a pre-emptive air or missile strike–just as Israeli bombers leveled Iraq’s Osirak reactor in 1981? Such a move would have to come before the plant goes online in early 2004 to avoid turning the region into a radioactive mess. If Russia doesn’t curb its nuclear ambitions, a confrontation in Iran could be the first of many.
