Economics Department

Economic Survey of Chile 2005: Executive Summary

 

The following is the Executive Summary of the OECD assessment and recommendations, taken from the Economic Survey of Chile 2005 published on 4 November 2005.

Chile continues to be a strong performer and the economy has recovered in earnest from the 1998 2003 slowdown. Macroeconomic management has been exemplary and policies have been framed in rules-based, credible settings. Public finances are particularly robust, making the economy resilient to shocks. Structural reform is on-going, unleashing opportunities for growth. But Chile’s income gap remains sizeable relative to the OECD area. Lifting the economy’s growth potential is therefore Chile’s overarching policy challenge.

Encouraging innovation

Chile fulfils important framework conditions for innovation, including macroeconomic stability and investor-friendly FDI and trade regimes. But R&D intensity is low and financed primarily by the government in a fragmented National Innovation System that is not conducive to long-term planning. Further enhancing human capital would facilitate the development and diffusion of knowledge. The creation of the National Innovation Council can do much to boost policy coordination but the allocation of government funds will need to be carried out in a cost-effective, transparent, contestable fashion and geared towards encouraging business-financed innovation consistent with Chile’s comparative advantages.

Continuing to foster pro-competition regulation

Regulatory reform in network industries is on-going. In electricity, recent reform has fostered competition and aimed at ensuring the security of supply in light of recurrent cuts in gas shipments from Argentina. Unbundling retailing from distribution would be advisable. In telecommunications, the central regulatory issue is how to encourage competition while setting efficient prices for dominant firms. Public-private partnerships have contributed to reducing Chile’s “infrastructure deficit” over the years, but as this deficit is closing, governance will need to be enhanced to strengthen independent checks and balances and safeguard the budget from undue exposure to contingent liabilities.

Making better use of labour inputs

Human capital accumulation, on and off the job, is essential for boosting productivity. Policies should aim to raise educational standards to the level of international top performers as a means of accelerating Chile’s catch-up with the more prosperous countries in the OECD area. The quality of labour training can be improved to encourage the upskilling of those already in the labour force. Labour force participation can be raised by removing restrictions on full-time work and reforming the legislation on labour dispatching and subcontracting, which could encourage the use of more flexible labour contracts, while improving options for affordable childcare and pre-school education.

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Return to the Economic Survey of Chile 2005

A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.

Este es el enlace con la versión española de las recomendaciones del Estudio Económico de la OCDE sobre Chile.

To access the full version of the OECD Economic Survey of Chile:

  • Readers at subscribing institutions can go to SourceOECD, our online library.
  • Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop. 
  • Government officials can go to  OLISnet's Publication Locator.
  • Accredited journalists can go to their password-protected website .

For further information please contact Chile Desk at the OECD Economics Department at webmaster@oecd.org.  The OECD Secretariat's report was prepared by Luiz de Mello and Nanno Mulder under the supervision of Silvana Malle.

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