Chile: Happy Independence Day to a real success story in Latin America
Our friends down in Chile will enjoy another anniversary of their independence in 1810:
"Today, September 18 is celebrated in Chile as their Independence Day. It is remembered with the fiestas patrias or "national parties." The celebrations kick off in early September and can last for weeks. All over Chile, people celebrate with food, parades, reenactments, and dancing and music. The national rodeo finals are held in Rancagua, thousands of kites fill the air in Antofagasta, in Maule they play traditional games, and many other places have traditional celebrations. If you're going to Chile, the middle of September is a great time to visit to catch the festivities!"
Yes, it's a great day to eat some good food and dance a little 'cueca". By the way, watching Chileans dance "cueca" is really a treat:
Chile has another reason to celebrate today. It's economy is the jewel of Latin America, as reported by IBD recently:
"In 30 years, Chile has gone from being a Third World country to a developed one, raising per capita income to $17,000, achieving 6% to 7% GDP growth most years, and attracting billions in foreign investment.
It didn't happen in a vacuum.
The country was the first nation to try free-market reforms as articulated by the great economist Milton Friedman, whose ideas were still new in 1974.
When Gen. Augusto Pinochet was asked by Chile's legislature to take over in September 1973, he created a MacArthur-style caretakership and turned the job of cleaning up a ravaged economy over to a group of University of Chicago-trained economists.
Known as "Chicago Boys," they found a nation that was a mess after the short Marxist dictatorship of Salvador Allende and four decades of bad policy, including state-owned industries, heavy protectionism and massive bureaucracy. Special interests — unions and corporate monopolies — controlled major parts of the economy. Property rights were battered.
The Chicago Boys rescued their country with three critical economic reforms: fiscal control, privatization of social security and free trade. It not only worked, it quietly freed the nation from even the military regime and created the vibrant democracy Chile is now.
First, Finance Minister Sergio De Castro made the central bank independent. He ended subsidies and cut government spending. He slashed bureaucrats from 700,000 to 550,000. It was a painful austerity in the absence of a big private sector.
In the first four years of the new government, Chile's economy surged 32%.
Next, economist Jose Pinera, Chile's Labor and Social Security Minister, privatized social security. The plan helped the government balance its books and let workers choose between personal retirement accounts or the bankrupt state-run pension system. Workers could keep their own money, invest it, decide when to retire, and, best of all, owned their pensions as property they could leave to heirs. Some 97% of Chileans switched.
Pinera's privatized accounts not only outperformed the state system by a factor of 10, but the savings they created provided capital to rebuild the country.
The last step came as Chile slashed tariffs and opened itself to the world. It signed more free-trade pacts than any nation, 58 at last count, which gave it access to 2 billion customers, an outsize market to swim in for a relatively small nation.
That enabled the country to specialize in what it did best — seafood, fruit, wine and its traditional mining exports. Its citizens got rich.
All three pillars upon which Chile's stunning transformation rests can be duplicated in any country, which is why so many imitate these reforms."
It is also a stable democracy and that is very important too.
There is a country with prosperity and political stability in Latin America called Chile. In fact, it also has a few things to teach us, specially its private retirement accounts and commitment to free market economics.
Thumbs up to our Chilean friends and do the "cueca"! You've earned this day of celebration.