Economic impact of Chile’s earthquake

Marketplace Staff Mar 1, 2010

Economic impact of Chile’s earthquake

Marketplace Staff Mar 1, 2010


Tess Vigeland: The death toll in Chile climbed past 700 over the weekend, following that massive earthquake that ripped across the Pacific Ocean floor. There are reports of looting in the shattered city of Concepcion, Chile’s second largest. And President Michelle Bachelet sent 10,000 soldiers into the area to restore order. Also today the government issued its first request for outside assistance to the United Nations. Why’d it take so long for Chile to ask for help? For some context we turn to Kevin Casas-Zamora. He’s a senior fellow at the Brookings Institution. Thanks for joining us.

Kevin Casas-Zamora: My pleasure.

Vigeland: Chile’s president now say that she will accept help from outside the country. But over the weekend the mantra seemed to be, hey, we can handle it. So can they?

Casas-Zamora: It’s doubtful. I was kind of surprised to learn of her initial reaction. And I think it betrays a certain perception of their own country, amongst the Chilean elite. Chile is a country that has done incredibly well over the past 25 years. And I guess that there’s this perception that Chile is on the verge of becoming a developed country. And I think their initial reaction betrayed that perception, that they could handle that, that they didn’t need anyone to meddle in the recovery effort and that asking for help was for countries like Haiti, but not for Chile.

Vigeland: Can you give us a sense of how the country has changed over those 20 years or so, particularly when it comes to their economy?

Casas-Zamora: Chile is in many respects the success story in Latin America. This is a country that over the past 25 years has had average growth rates well above 5 percent, that has consistently recorded fiscal surpluses.

Vigeland: And where is that coming from? Is that simply better money management? Or are there more natural resources that they’re tapping?

Casas-Zamora: Obviously, copper is very important for Chile. I mean, to this day, copper continues to be about 50 percent of Chilean exports. But more generally this is a country that has opened its economy massively to the world. That’s something that is crucial in this particular situation. I mean, Chile has well above $25 billion stashed away. They’ve used some of the money to reactivate the economy over the past couple of years, but they certainly have a very significant cushion in terms of a whole bunch of resources that they can use to invest in infrastructure and in general, in whatever tasks are required by the significant recovery that they have in front of them.

Vigeland: You mentioned that there’s been a lot of economic growth in Chile. How much of that do you know went into infrastructure that perhaps contributed to the death toll not being greater?

Casas-Zamora: I think why the death toll was as low as it has been given the magnitude of the tragedy, it ultimately has to do with development in general. The glaring comparison between Chile and Haiti showcases very well why development matters. And it matters because it saves hundreds of thousands of lives.

Vigeland: What do you think the rest of the world, other governments, are taking away from how Chile has handled this crisis thus far?

Casas-Zamora: My sense is that the most remarkable aspect of all this is that it comes in the wake of the earthquake in Haiti. And the contrast couldn’t be greater. Really, in Chile what we’re witnessing is a state that works, whereas in Haiti the most glaring absence in the immediate aftermath of the earthquake was of a state at all. I mean it was sort of a phantom state. Whereas in the case of Chile, you can definitely see what a difference a functioning state makes when a disaster such as this one strikes.

Vigeland: Kevin Casas-Zamora is a senior fellow at the Brookings Institution in Washington. Thanks so much for your help.

Casas-Zamora: My pleasure.

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