Chilean President Sebastian Pinera, who earned his fortune by setting up Chile’s first credit card network and revitalizing Lan Airlines SA, aims to vault his country into the ranks of developed nations by 2020. He talked to Bloomberg Markets magazine editor Ronald Henkoff and Bloomberg News Santiago bureau chief James Attwood on Dec. 6.
During the interview, which took place in Pinera’s sparsely furnished office at the Moneda presidential palace in Santiago, the sound of demonstrators outside marching in opposition to a hydroelectric project were a reminder of the social challenges the president has had to face since he took office in March 2010.
Pinera, who earned a doctorate in economics at Cambridge, Massachusetts-based Harvard University and once was a representative of Apple Inc. (AAPL) in Chile, has seen his popularity fall to 35 percent in November from a peak of 63 percent in October 2010, Bloomberg Markets reports in its February issue.
Dressed in a blue suit with a Chilean flag pin on the lapel, a starched white shirt and conservative red tie, Pinera spoke rapidly as he discussed his plans for his country, his views on seven months of student-led protests and his openness to foreign investment.
Here are excerpts from the interview:
Defeating Poverty
“Chile, which was the poorest Spanish colony in Latin America, is now the country with the highest per capita income. Our goal is to become a developed country and defeat poverty before the end of this decade. We need to do many, many things to achieve that.
“First of all, we need to grow at least 6 percent per year in order to reach $25,000 by 2020, which is roughly the average per capita income of most OECD countries. We need to create 1 million jobs to defeat underdevelopment and end poverty. The old pillars -- to have a stable democracy and market economy that is integrated with the world -- are not enough.
“We will have major education reform to increase the quality and the coverage of our system. We must increase investments in science and technology -- we will need to double that as a percentage of GDP -- as well as promote innovation and entrepreneurship. We also must improve income distribution.
“We are on track, because the average growth rate during the 20 months we have been in power is 6.5 percent. The average growth rate of the former government was 2.7 percent.
We aim to create 1 million jobs in four years, which with our labor force of 7.5 million, would be the equivalent of 15 million jobs in the U.S. We have already created 600,000 jobs, so we are on track there as well.
“We need to increase productivity to grow 6 percent a year. We are moving in the right direction: Productivity was negative in 2009, zero in 2010 and will be positive in 2011.”
Obstacles and Protests
“We have had to face three major threats that were not predicted. The first was the earthquake that hit our country in February 2010. We lost in a few minutes one out of every three schools, one of every three hospitals and, in total, $30 billion, which is 14 percent of GDP.
“The second problem is the international economy. We are very pessimistic about what will happen in Europe and the U.S. I think Europe is already in recession. The U.S. has not been able to recover from the 2008 crisis; the recovery will be slow and will take a lot of time. The emerging countries, including China, are not growing as they were before.
Social Unrest
“For us, it’s very important what is happening in the Asia-Pacific region because they have become by far our most important trading partners. The third phenomenon we’ve had to face is social unrest, which has been a bit overestimated by the press. Only 5 percent of secondary and university-level students were protesting, but they made a lot of noise.
“They were asking for free education for everybody with no conditions, and we don’t agree with that. We think that we should guarantee access to quality education for everybody and scholarships to those who need scholarships.
“We agree with them that we need to improve dramatically the quality of our education. But the main problems are not at the higher level; they are at the preschool and kindergarten level. If you’re not able to intervene at that early stage with children that are coming from vulnerable homes, then sometimes it’s too late.
“We have committed ourselves to cover all children belonging to households of the lowest 60 percent of the population.”
‘A Very Good Position’
“We are in a very good position because we have solid fiscal accounts. Our public debt is negative. We are creditors to the world, not debtors.
“Chile is a very open economy, and therefore we will be hit by the global deceleration. Our terms of trade are deteriorating, and of course, the confidence of consumers and investors will be affected.
That’s why we’re predicting that the growth rate for 2012 will be between 4 percent and 5 percent, much lower than the 6.5 percent that we are expecting for 2011.
“We are preparing what we call a contingency plan because we have the resources to undertake a pro-growth fiscal policy. We also can do something in our monetary policy by lowering interest rates. We have $15 billion in our foreign savings accounts that are designed specifically to compensate for bad years like the one we will face in 2012.”
Chile’s Investment Climate
“Chile is a very open country in every sense. We have huge opportunities to invest in Chile in many, many different sectors: energy, mining, agriculture, manufacturing and many others.
“We have a very stable system, a very stable democracy, and we are very much committed to the rule of law, which is important because that gives certainty and stability that the rules will not be changed arbitrarily. I would like to send the message to foreign investors that they are most welcome in Chile and that they have huge opportunities.”
bloomberg.com
During the interview, which took place in Pinera’s sparsely furnished office at the Moneda presidential palace in Santiago, the sound of demonstrators outside marching in opposition to a hydroelectric project were a reminder of the social challenges the president has had to face since he took office in March 2010.
Pinera, who earned a doctorate in economics at Cambridge, Massachusetts-based Harvard University and once was a representative of Apple Inc. (AAPL) in Chile, has seen his popularity fall to 35 percent in November from a peak of 63 percent in October 2010, Bloomberg Markets reports in its February issue.
Dressed in a blue suit with a Chilean flag pin on the lapel, a starched white shirt and conservative red tie, Pinera spoke rapidly as he discussed his plans for his country, his views on seven months of student-led protests and his openness to foreign investment.
Here are excerpts from the interview:
Defeating Poverty
“Chile, which was the poorest Spanish colony in Latin America, is now the country with the highest per capita income. Our goal is to become a developed country and defeat poverty before the end of this decade. We need to do many, many things to achieve that.
“First of all, we need to grow at least 6 percent per year in order to reach $25,000 by 2020, which is roughly the average per capita income of most OECD countries. We need to create 1 million jobs to defeat underdevelopment and end poverty. The old pillars -- to have a stable democracy and market economy that is integrated with the world -- are not enough.
“We will have major education reform to increase the quality and the coverage of our system. We must increase investments in science and technology -- we will need to double that as a percentage of GDP -- as well as promote innovation and entrepreneurship. We also must improve income distribution.
“We are on track, because the average growth rate during the 20 months we have been in power is 6.5 percent. The average growth rate of the former government was 2.7 percent.
We aim to create 1 million jobs in four years, which with our labor force of 7.5 million, would be the equivalent of 15 million jobs in the U.S. We have already created 600,000 jobs, so we are on track there as well.
“We need to increase productivity to grow 6 percent a year. We are moving in the right direction: Productivity was negative in 2009, zero in 2010 and will be positive in 2011.”
Obstacles and Protests
“We have had to face three major threats that were not predicted. The first was the earthquake that hit our country in February 2010. We lost in a few minutes one out of every three schools, one of every three hospitals and, in total, $30 billion, which is 14 percent of GDP.
“The second problem is the international economy. We are very pessimistic about what will happen in Europe and the U.S. I think Europe is already in recession. The U.S. has not been able to recover from the 2008 crisis; the recovery will be slow and will take a lot of time. The emerging countries, including China, are not growing as they were before.
Social Unrest
“For us, it’s very important what is happening in the Asia-Pacific region because they have become by far our most important trading partners. The third phenomenon we’ve had to face is social unrest, which has been a bit overestimated by the press. Only 5 percent of secondary and university-level students were protesting, but they made a lot of noise.
“They were asking for free education for everybody with no conditions, and we don’t agree with that. We think that we should guarantee access to quality education for everybody and scholarships to those who need scholarships.
“We agree with them that we need to improve dramatically the quality of our education. But the main problems are not at the higher level; they are at the preschool and kindergarten level. If you’re not able to intervene at that early stage with children that are coming from vulnerable homes, then sometimes it’s too late.
“We have committed ourselves to cover all children belonging to households of the lowest 60 percent of the population.”
‘A Very Good Position’
“We are in a very good position because we have solid fiscal accounts. Our public debt is negative. We are creditors to the world, not debtors.
“Chile is a very open economy, and therefore we will be hit by the global deceleration. Our terms of trade are deteriorating, and of course, the confidence of consumers and investors will be affected.
That’s why we’re predicting that the growth rate for 2012 will be between 4 percent and 5 percent, much lower than the 6.5 percent that we are expecting for 2011.
“We are preparing what we call a contingency plan because we have the resources to undertake a pro-growth fiscal policy. We also can do something in our monetary policy by lowering interest rates. We have $15 billion in our foreign savings accounts that are designed specifically to compensate for bad years like the one we will face in 2012.”
Chile’s Investment Climate
“Chile is a very open country in every sense. We have huge opportunities to invest in Chile in many, many different sectors: energy, mining, agriculture, manufacturing and many others.
“We have a very stable system, a very stable democracy, and we are very much committed to the rule of law, which is important because that gives certainty and stability that the rules will not be changed arbitrarily. I would like to send the message to foreign investors that they are most welcome in Chile and that they have huge opportunities.”
bloomberg.com
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