Chile's recent copper‐driven prosperity: does it provide lessons for other mineral rich developing nations?

Abstract

While the copper industry has had an important role in Chile's economic development for more than 150 years, a dramatic increase in copper production has provided the base for strong new growth and development since the late 1980s. The recent Chilean success supports the traditional view of the positive relationship between mineral exploitation and mineral development. As such, it provides a strong counter example to the resource curse thesis, recently proposed by several authors. Using a simple policy framework outlined by Weber‐Fahr (2002), this paper considers several of the key reasons that appear to be important to the recent Chilean success story. It then proceeds to consider how these fit in with suggested policy strategies suggested by the World Bank, and also by Ross (2001).

Keywords:

• Growth theory
• resource curse thesis
• copper
• quality of life indicators

Notes

Another apparent success story has occurred in Botswana. Auty (2001) considers the Botswanan experience in a recent paper.

One reflection of this is the lack of reference to the standard growth theory contributions by authors such as Rostow, Harrod, Solow, dos Santos or Romer in these studies.

These are typically associated with Dutch disease effects.

On this latter point see, for example, O'Brien (1994, p18).

The size of this decline depends on the price deflator that one uses – on this issue see Svedberg and Tilton (2003).

Authors such as Spilimbergo (1999) and Jadresic and Zahler (2000) provide useful reviews of this discussion.

This group included countries such as Poland, Panama, Costa Rica, Botswana, Algeria, Bulgaria, Mauritius, Malaysia, Argentina, Mexico, South Africa, Venezuela, Uruguay, Brazil, Hungary, Gabon, Trinidad and Tobago, Portugal, Korea, Greece and Saudi Arabia.

Perceptions about the fairness of a taxation system may change over time.

In a related but slightly different vein, members of many military regimes enrich themselves through corrupt practices. There is a general view that this happened infrequently during the period of military rule between 1970 and 1990.

By way of contrasting example, some economists were predicting a tripling of the size of the GDP of Papua New Guinea in the early 1990s. This compares with a contribution of say 15 per cent to Chilean GDP as a result of the rise of copper in the early 1990s.

Davis used a composite index based on the ratio of a country's mining gross product to its GDP, and the ratio of mining exports to merchandise exports.