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Chile Table of Contents


Continuity in Economic Policy

For years, opponents of the Pinochet government had argued that its economic program was based on ideas alien to the Chilean tradition. In early 1990, analysts, scholars, stockbrokers, and politicians throughout the world wondered if the new democratic government of President Aylwin would maintain some, or for that matter any, of the most important aspects of the military government's market-oriented policies, or if the CPD government would reform the system along the lines of the decade-long criticisms of the opposition. What made this question particularly interesting was that at the time of the restoration of democracy, Chile was considered by many, including international institutions such as the World Bank and the IMF, as a premier example of the way the adjustment process after the debt crisis should be carried out. A number of analysts asked themselves how the advent of democracy would affect Chile's economic policy. In particular, analysts were concerned about the new government's attitude toward the free price system and Chile's new openness to international competition.

Regarding price competition, the Aylwin program's position was stated as follows: "We affirm that within an efficient economic policy there is no role for price controls." In discussing the role of the market, the program noted: "The market cannot be replaced as a mechanism for consumers to articulate their preferences." These views were a far cry from those sustained by Frei's Christian Democratic government of the 1960s and, especially, from those of Allende's UP government of 1970-73. They were also substantially different from those of the new market critics of the 1970s and mid-1980s. Indeed, the CPD program conveyed that there had been a significant convergence of domestic views on the role of markets in the economic process.

Addressing the opening of the economy to the rest of the world, the CPD program stated: "The most important instruments of the external sector policy are the maintenance of a stable high real exchange rate and a reasonably low import tariff" [emphasis added]. This statement suggests that from its onset the Aylwin government was not prepared to implement major changes to one of the most fundamental features of Chile's new economics.

Data as of March 1994