Chile as Latin America’s Fastest-Growing Economy

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Table of Contents

Chile Description
Economic Affiliations of Chile
Comparative Advantage of Chile
Trade Policies
References

Chile Description

Chile is a Latin American country with a reputation for being the first of the region in every domain. For instance, Chile is one of Latin America’s fastest-growing economies, as the World Bank (2022-aa) estimated. Politically speaking, Chile was the first Latin American country to sign an association agreement with the European Union (European External Action Service [EEAS], 2021). Therefore, Chile can be considered a significant country in South America.

Economic Affiliations of Chile

As for the country’s economic affiliations, Chile participates in trade with many countries. Examples include the states of the EU, South Korea, New Zealand, and Japan (The World Bank, 2022-a). According to the statistics provided by the World Bank (2022-b), Chile’s population reaches slightly over 19 million people. The country’s GDP as of 2021 is $317 billion, and GDP per capita is $16 502 (The World Bank, 2022-b). Chile is one of the most industrialized states in Latin America, specializing primarily in the mining and exporting of copper. Conversely, agricultural production mainly focuses on producing wine, salmon, and forestry goods (The World Bank, 2022-a). Currently, Chile relies on the industrial sector, with its largest contribution being the distribution of copper.

Comparative Advantage of Chile

It stands to reason that Chile benefits heavily from the copper trade. The country’s mining activity specialization corresponds to the comparative advantage concept seen in the Ricardian and Heckscher-Ohlin models. Comparative advantage is the ability of the country to excel in one economic activity compared to other producers (Crespo et al., 2021). According to Brondino (2021), specialization leads to the increased global output of specialty products, thereby increasing economic gain for all parties. This principle is inherent to both the Ricardian and Heckscher-Ohlin models. On the other hand, Chilean imports are consistent with the comparative advantage principle. They include “crude and refined oil, coal, gas and lubricants, chemicals, cars, metallic products, parts, other machinery and equipment, wearing apparel” (Trading Economics, 2022). In short, Chile’s specialization in copper distribution and import promotes global output, according to Ricardian, Heckscher-Ohlin, and other models encompassing the comparative advantage principle.

Trade Policies

Additionally, it is vital to give an overview of the trade policies in Chile. According to the World Bank (2022-c), Chile has almost no import tariffs or quotas, making it beneficial to exporters. The tariffs in Chile are only applied to such products as sugar. Open foreign trade has positively influenced Chile and its domestic market since it allows the country to be open to any investment, leading to growth.

References

Brondino, G. (2021). Fragmentation of Production, Comparative Advantage, and the Heckscher-Ohlin Theory. Review of Political Economy, 1-20.

Crespo, E., Dvoskin, A., & Ianni, G. (2021). Exclusion in ‘Ricardian’Trade Models. Review of Political Economy, 33(2), 194-211.

European External Action Service. (2021). The European Union and Chile. Web.

The World Bank. (2022-a). Chile overview: Development news, research, data. Web.

The World Bank. (2022-b). Chile: Data. Web.

The World Bank. (2022-c). World development indicators. Web.

Trading Economics. (2022). Chile imports. Web.

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Chile as Latin America’s Fastest-Growing Economy

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