What economic factors shaped the history of Chile under pinochet?

Answer 1

The "Miracle of Chile" was a term used by free-market Nobel Prize winning economist Milton Friedman to describe liberal and free market reorientation of the economy of Chile in the 1980s, 1990s, and 2000s, and the purported benefits of his style of economic liberalism. He said the "Chilean economy did very well, but more important, in the end the central government, the military junta of Pinochet, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society."

Many independent economist have argued that the experience of Chile in this period rather demonstrate the failure of Friedman-style economic liberalism, claiming that there was little net economic growth from 1975-1983 (during the "pure Monetarist experiment") with sustained economic growth only coming after later reforms, and social indicators remain poor.

In 1973, inflation in Chile was hundreds of percents, the country had no foreign reserves, and GDP was failing. The economic reforms were originally drafted by Chilean economists known as the "Chicago Boys" because many of them had studied at the University of Chicago. The plan had three main objectives: economic liberalization, privatization of state owned companies (and pension funds in 1981), and stabilization of inflation (throwout budget austerity resulting on underinvestment on health and education). The first reforms were implemented in three rounds - 1974-1983, 1985, and 1990. The reforms were continued and strengthened after 1990 but with extra care of social aspects of the national budget.

Successive post-Pinochet democratic governments have continued these policies. In 2002 Chile signed an association agreement with the European Union (comprising free trade, political and cultural agreements), in 2003, an extensive free trade agreement with the United States, and in 2004 with South Korea, expecting a boom in import and export of local produce and becoming a regional trade-hub. Continuing the coalition's free-trade strategy, in August 2006 President Mrs Bachelet promulgated a free trade agreement with the People's Republic of China (signed under the previous administration of Ricardo Lagos), the first Chinese free-trade agreement with a Latin American nation; similar deals with Japan and India were promulgated in August 2007.