14/09/15-The end of the mining boom has highlighted the urgent need for Chile to diversify its economy away from commodity-intensive sectors, according to a new OECD report presented by Secretary-General Angel Gurría today. Chile has made significant social and economic progress over the last two decades, it says.
Average per capita household disposable income more than doubled since the mid-1990s, to become the highest in Latin America. At the same time, absolute poverty rates decreased from over 40% to 7.8%, with relative poverty declining at a faster pace than in any other OECD country.
'The key challenge going forward is continuing to deliver inclusive growth that addresses major inequalities while boosting productivity', said OECD Secretary-General Angel Gurría. 'Achieving these goals is made harder by the current economic situation, but the government is on the right reform track'.
The report, part of the OECD’s Better Policies series, says the government has already taken important steps to improve living standards despite lower growth rates. They include measures to improve the quality and equity of the school system as well as reforms to increase the fairness of the tax code and raise revenues for higher spending on education and health care.
To complement these reforms, the OECD emphasises the need to support innovation and ensure citizens have the right skills for the economy to develop outside the commodity-related sectors.
While R&D expenditure has increased slightly in recent years, to reach 0.4% of GDP in 2013, it remains the lowest in the OECD. Similarly, 15-year olds still lag their peers in other OECD countries in terms of their education levels – in mathematics the gap with the OECD average is equivalent to 1.7 years of secondary schooling.
The report also outlines measures to reduce inequalities in living standards and cushion the effects of lower growth on vulnerable groups. The country suffers from strong labour market inequalities. Women’s participation rate in the workforce is among the lowest in the OECD while young people facing severe difficulties in finding jobs.
Enhancing health and social policies and strengthening the redistributive effect of its tax and transfer system will help reduce inequality, says the OECD.
The report adds that the government’s decentralisation reforms should help tackle the high level of regional inequality in Chile but complementary measures are needed to ensure their effectiveness. Fiscal equalisation mechanisms need to be strengthened in order to ensure that decentralisation does not lead to widening disparities in access to quality public services.
The OECD also says that while the Chilean government has already made important steps to reduce environmental impacts of growth, further progress is needed in areas such as environmental taxation as well as waste and water management.