Paying attention to Chile

Given the importance of Chile as Latin America's "success" story, recent events are very important:

a. The reduction in copper prices have resulted in a surprisingly quick move from trade surplus to trade deficit.  According to data from Oxford Analytica, the trade sbalance has gone from +US$23.7b (more than 14% of GDP) in 2007 to an estimated +$10.2b in 2008 and -2.4b in 2009.  This just shows that much of Chile's recent success was dependent on commodities--an old story in Latin America.

b. This month Chile announced a relatively generous stimulus plan financed with the stabilization fund.  This fund increased rapidly in the last few years thanks to high copper prices.   Chile may thus become a successful example of anti-cyclical policies supported by an intelligent use of commodity revenues.   Yet it may also be that these policies fail to maintain a relatively healty rate of growth or that Chile becomes unwilling to spend more of this money. 

In any case, it is clear that Chile is mounting a more intelligent response than Mexico's passive option... and that it has become the country to follow if we want to learn more abou the characteristics and likelihood of anti-cyclical policies in commodity-rich, Latin American countries.