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Prudence as a National Consensus

Sep 1, 2002

Despite the financial turmoil spreading across South America, Chile remains an isalnd in the storm. The country has pragmatism inits blood and its finance minister, Nicolás Eyzaguirre, has maintained rigid control over national spending. His former counterpart in Peru (see "Politics Torpedoes Growth") has had less success.

Nicolás Eyzaguirre is right to be modest about his achievements as Chile's finance minister, even though he has kept the country growing through Latin America's worst crisis in many years. Argentina, Chile's neighbor to the east, is sunk in a depression. In Peru to the north, protesters are attacking the government's pro-market policies. Bolivia and Brazil have little to show for their years of reform. How was Chile able to find the road to stability and stay the course when so many South American countries have stumbled, declaring free market reforms unworkable or unjust? Many forget Chile's turbulent recent history. In the 1970s it suffered under far-left Socialist President Salvador Allende, and then his nemesis, Gen. Augusto Pinochet. His military government presided over a catastrophic banking crisis. Chileans took the lessons of those traumatic years to heart, embarking on radical, but well-planned free market reforms under Pinochet's finance minister...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management