Chile

2008/9 Schools Wikipedia Selection. Related subjects: Americas; Countries

República de Chile  (Spanish) Republic of Chile
Flag Coat of arms
Motto: Por la razón o la fuerza "By right or might" (Spanish)
Anthem:  Himno Nacional de Chile (Spanish)
Capital (and largest city)		Santiago1
Official languages		Spanish
Demonym		Chilean
Government		Democratic republic
-	President	Michelle Bachelet
Independence		from Spain
-	First National Government Junta	September 18, 1810
-	Declared	February 12, 1818
-	Recognized	April 25, 1844
Area
-	Total	756,950 km² ( 38th) 292,183  sq mi
-	Water (%)	1.07²
Population
-	June 2007 estimate	16,598,074 ( 60th)
-	2002 census	15,116,435
-	Density	22/km² ( 194th) 57/sq mi
GDP ( PPP)		2007 estimate
-	Total	$231.061 billion ( 44th)
-	Per capita	$13,936 ( 54th)
GDP (nominal)		2007 estimate
-	Total	$163.792 billion ( 41st)
-	Per capita	$9,879 ( 51st)
Gini (2006)		54 (high)
HDI (2005)		▲ 0.867 (high) ( 40th)
Currency		Peso ( CLP)
Time zone		n/a ( UTC-4)
-	Summer ( DST)	n/a ( UTC-3)
Internet TLD		.cl
Calling code		+56
1	The legislative body operates in Valparaíso.
2	Includes Easter Island and Isla Sala y Gómez; does not include 1,250,000 km² (482,628 sq mi) of territory claimed in Antarctica.

Chile, officially the Republic of Chile (Spanish: República de Chile ), is a country in South America occupying a long and narrow coastal strip wedged between the Andes mountains and the Pacific Ocean. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage at the country's southernmost tip. It is one of only two countries in South America that does not have a border with Brazil. The Pacific forms the country's entire western border, with a coastline that stretches over 6,435 kilometres. Chilean territory extends to the Pacific Ocean which includes the overseas territories of Juan Fernández Islands, the Sala y Gómez islands, the Desventuradas Islands and Easter Island located in Polynesia. Chile claims 1,250,000 km² (482,628 sq mi) of territory in Antarctica.

Chile's unusual, ribbon-like shape —4,300 km long and on average 175 km wide— has given it a hugely varied climate, ranging from the world's driest desert - the Atacama - in the north, through a Mediterranean climate in the centre, to a snow-prone Alpine climate in the south, with glaciers, fjords and lakes. The northern Chilean desert contains great mineral wealth, principally copper. The relatively small central area dominates the country in terms of population and agricultural resources. This area also is the cultural and political centre from which Chile expanded in the late 19th century, when it incorporated its northern and southern regions. Southern Chile is rich in forests and grazing lands and features a string of volcanoes and lakes. The southern coast is a labyrinth of fjords, inlets, canals, twisting peninsulas, and islands. The Andes Mountains are located on the eastern border.

Prior to the coming of the Spanish in the 16th century, northern Chile was under Inca rule while Araucanian Indians (also known as Mapuches) inhabited central and southern Chile. Although Chile declared its independence in 1810, decisive victory over the Spanish was not achieved until 1818. In the War of the Pacific (1879-83), Chile defeated Peru and Bolivia and won its present northern regions. It was not until the 1880s that the Araucanian Indians were completely subjugated. The country, which had been relatively free of the coups and arbitrary governments that blighted the South American continent, endured a 17 year military dictatorship (1973-1990), one of the bloodiest in 20th-century Latin America that left more than 3,000 people dead and missing.

Currently, Chile is one of South America's most stable and prosperous nations. Within the greater Latin American context it leads in terms of competitiveness, quality of life, political stability, globalization, economic freedom, low perception of corruption and comparatively low poverty rates. It also ranks high regionally in freedom of the press, human development and democratic development. Its status as the region's richest country in terms of gross domestic product per capita (at market prices and purchasing power parity) is countered by its high level of income inequality, as measured by the Gini index.

Etymology

There are various theories about the origin of the word Chile. According to one theory the Incas of Peru, who had failed to conquer the Araucanians, called the valley of the Aconcagua "Chili" by corruption of the name of a tribal chief ("cacique") called Tili, who ruled the area at the time of the Incan conquest. Another theory points to the similarity of the valley of the Aconcagua with that of the Casma Valley in Peru, where there was a town and valley named Chili. Other theories say Chile may derive its name from the indigenous Mapuche word chilli, which may mean "where the land ends," "the deepest point of the Earth," or "sea gulls;" or from the Quechua chin, "cold," or the Aymara tchili, meaning "snow." Another meaning attributed to chilli is the onomatopoeic cheele-cheele—the Mapuche imitation of a bird call. The Spanish conquistadors heard about this name from the Incas and the few survivors of Diego de Almagro's first Spanish expedition south from Peru in 1535-36 called themselves the "men of Chilli."

History

About 10,000 years ago, migrating Native Americans settled in fertile valleys and along the coast of what is now Chile. The Incas briefly extended their empire into what is now northern Chile, but the area's barrenness prevented extensive settlement.

In 1520, while attempting to circumnavigate the earth, the Portuguese Ferdinand Magellan, discovered the southern passage now named after him, the Strait of Magellan. The next Europeans to reach Chile were Diego de Almagro and his band of Spanish conquistadors, who came from Peru in 1535 seeking gold. The Spanish encountered hundreds of thousands of Native Americans from various cultures in the area that modern Chile now occupies. These cultures supported themselves principally through slash-and-burn agriculture and hunting. The conquest of Chile began in earnest in 1540 and was carried out by Pedro de Valdivia, one of Francisco Pizarro's lieutenants, who founded the city of Santiago on February 12, 1541. Although the Spanish did not find the extensive gold and silver they sought, they recognized the agricultural potential of Chile's central valley, and Chile became part of the Viceroyalty of Peru.

Conquest of the land that is today called Chile took place only gradually, and the Europeans suffered repeated setbacks at the hands of the local population. A massive Mapuche insurrection that began in 1553 resulted in Valdivia's death and the destruction of many of the colony's principal settlements. Subsequent major insurrections took place in 1598 and in 1655. Each time the Mapuche and other native groups revolted, the southern border of the colony was driven northward. The abolition of slavery in 1683 defused tensions on the frontier between the colony and the Mapuche land to the south, and permitted increased trade between colonists and the Mapuche.

The drive for independence from Spain was precipitated by usurpation of the Spanish throne by Napoleon's brother Joseph in 1808. A national junta in the name of Ferdinand—heir to the deposed king—was formed on September 18, 1810. The junta proclaimed Chile an autonomous republic within the Spanish monarchy. A movement for total independence soon won a wide following. Spanish attempts to re-impose arbitrary rule during what was called the " Reconquista" led to a prolonged struggle.

Intermittent warfare continued until 1817, when an army led by Bernardo O'Higgins, Chile's most renowned patriot, and José de San Martín, hero of the Argentine War of Independence, crossed the Andes into Chile and defeated the royalists. On February 12, 1818, Chile was proclaimed an independent republic under O'Higgins' leadership. The political revolt brought little social change, however, and 19th century Chilean society preserved the essence of the stratified colonial social structure, which was greatly influenced by family politics and the Roman Catholic Church. A strong presidency eventually emerged, but wealthy landowners remained extremely powerful.

Toward the end of the nineteenth century, the government in Santiago consolidated its position in the south by ruthlessly suppressing the Mapuche during the Occupation of Araucanía. In 1881, it signed a treaty with Argentina confirming Chilean sovereignty over the Strait of Magellan. As a result of the War of the Pacific with Peru and Bolivia (1879–83), Chile expanded its territory northward by almost one-third, eliminating Bolivia's access to the Pacific, and acquired valuable nitrate deposits, the exploitation of which led to an era of national affluence. The Chilean Civil War in 1891 brought about a redistribution of power between the President and Congress, and Chile established a parliamentary style democracy. However, the Civil War had also been a contest between those who favored the development of local industries and powerful Chilean banking interests, particularly the House of Edwards who had strong ties to foreign investors. Hence the Chilean economy partially degenerated into a system protecting the interests of a ruling oligarchy. By the 1920s, the emerging middle and working classes were powerful enough to elect a reformist president, Arturo Alessandri Palma, whose program was frustrated by a conservative congress. Alessandri Palma's reformist tendencies were partly tempered later by an admiration for some elements of Mussolini's Italian Corporate State. In the 1920s, Marxist groups with strong popular support arose.

A military coup led by General Luis Altamirano in 1924 set off a period of great political instability that lasted until 1932. The longest lasting of the ten governments between those years was that of General Carlos Ibáñez del Campo, who briefly held power in 1925 and then again between 1927 and 1931 in what was a de facto dictatorship, although not really comparable in harshness or corruption to the type of military dictatorship that has often bedeviled the rest of Latin America, and certainly not comparable to the violent and repressive regime of Augusto Pinochet decades later. By relinquishing power to a democratically elected successor, Ibáñez del Campo retained the respect of a large enough segment of the population to remain a viable politician for more than thirty years, in spite of the vague and shifting nature of his ideology. When constitutional rule was restored in 1932, a strong middle-class party, the Radicals, emerged. It became the key force in coalition governments for the next 20 years. During the period of Radical Party dominance (1932–52), the state increased its role in the economy. In 1952, voters returned Ibáñez del Campo, now reincarnated as a sort of Chilean Perón, to office for another six years. Jorge Alessandri succeeded Ibáñez del Campo in 1958, bringing Chilean conservatism back into power democratically for another term.

The 1964 presidential election of Christian Democrat Eduardo Frei Montalva by an absolute majority initiated a period of major reform. Under the slogan "Revolution in Liberty", the Frei administration embarked on far-reaching social and economic programs, particularly in education, housing, and agrarian reform, including rural unionization of agricultural workers. By 1967, however, Frei encountered increasing opposition from leftists, who charged that his reforms were inadequate, and from conservatives, who found them excessive. At the end of his term, Frei had accomplished many noteworthy objectives, but he had not fully achieved his party's ambitious goals.

In 1970, Senator Salvador Allende Gossens, a Marxist physician and member of Chile's Socialist Party, who headed the " Popular Unity" (UP or "Unidad Popular") coalition of the Socialist, Communist, Radical, and Social-Democratic Parties, along with dissident Christian Democrats, the Popular Unitary Action Movement (MAPU), and the Independent Popular Action, won a plurality of votes in a three-way contest. Despite pressure from the government of the United States, the Chilean Congress, keeping with tradition, conducted a runoff vote between the leading candidates, Allende and former president Jorge Alessandri and chose Allende by a vote of 153 to 35. Frei refused to form an alliance with Alessandri to oppose Allende, on the grounds that the Christian Democrats were a workers party and could not make common cause with the oligarchs.

Allende's program included advancement of workers' interests; a thoroughgoing implementation of agrarian reform; the reorganization of the national economy into socialized, mixed, and private sectors; a foreign policy of "international solidarity" and national independence; and a new institutional order (the "people's state" or "poder popular"), including the institution of a unicameral congress. The Popular Unity platform also called for nationalization of foreign (U.S.) ownership of Chile's major copper mines.

An economic depression that began in 1967 peaked in 1970, exacerbated by capital flight, plummeting private investment, and withdrawal of bank deposits by those opposed to Allende's socialist program. Production fell and unemployment rose. Allende adopted measures including price freezes, wage increases, and tax reforms, which had the effect of increasing consumer spending and redistributing income downward. Joint public-private public works projects helped reduce unemployment. Much of the banking sector was nationalized. Many enterprises within the copper, coal, iron, nitrate, and steel industries were expropriated, nationalized, or subjected to state intervention. Industrial output increased sharply and unemployment fell during the Allende administration's first year.

Other reforms undertaken during the early Allende period included redistribution of millions of hectares of land to landless agricultural workers as part of the agrarian reform program, giving the armed forces an overdue pay increase, and providing free milk to children. The Indian Peoples Development Corporation and the Mapuche Vocational Institute were founded to address the needs of Chile's indigenous population.

The nationalization of U.S. and other foreign-owned companies led to increased tensions with the United States. The Nixon administration brought international financial pressure to bear in order to restrict economic credit to Chile. Simultaneously, the CIA funded opposition media, politicians, and organizations, helping to accelerate a campaign of domestic destabilization. By 1972, the economic progress of Allende's first year had been reversed and the economy was in crisis. Political polarization increased, and large mobilizations of both pro- and anti-government groups became frequent, often leading to clashes.

By early 1973, inflation was out of control. The crippled economy was further battered by prolonged and sometimes simultaneous strikes by physicians, teachers, students, truck owners, copper workers, and the small business class. A US-backed military coup overthrew Allende on September 11, 1973. As the armed forces bombarded the presidential palace (Palacio de La Moneda), Allende reportedly committed suicide. A military government, led by General Augusto Pinochet Ugarte, took over control of the country. The first years of the regime were marked by serious human rights violations. On October 1973, at least 72 people were murdered by the Caravan of Death. At least a thousand people were executed during the first six months of Pinochet in office, and at least two thousand more were killed during the next sixteen years, as reported by the Rettig Report. Some 30,000 were forced to flee the country, and tens of thousands of people were detained and tortured, as investigated by the 2004 Valech Commission. A new Constitution was approved by a highly irregular and undemocratic plebiscite characterized by the absence of registration lists, on September 11, 1980, and General Pinochet became President of the Republic for an 8-year term.

In the late 1980s, the regime gradually permitted greater freedom of assembly, speech, and association, to include trade union and limited political activity. The right-wing military government pursued free market economic policies. During Pinochet's nearly 17 years in power, Chile moved away from state involvement, toward a largely free market economy that saw an increase in domestic and foreign private investment, although the copper industry and other important mineral resources were not returned to foreign ownership. In a plebiscite on October 5, 1988, General Pinochet was denied a second 8-year term as president (56% against 44%). Chileans elected a new president and the majority of members of a two-chamber congress on December 14, 1989. Christian Democrat Patricio Aylwin, the candidate of a coalition of 17 political parties called the Concertación, received an absolute majority of votes (55%).. President Aylwin served from 1990 to 1994, in what was considered a transition period.

In December 1993, Christian Democrat Eduardo Frei Ruiz-Tagle, the son of previous president Eduardo Frei Montalva, led the Concertación coalition to victory with an absolute majority of votes (58%). Frei Ruiz-Tagle was succeeded in 2000 by Socialist Ricardo Lagos, who won the presidency in an unprecedented runoff election against Joaquín Lavín of the rightist Alliance for Chile. In January 2006 Chileans elected their first woman president, Michelle Bachelet Jeria, of the Socialist Party. She was sworn in on March 11, 2006, extending the Concertación coalition governance for another four years.

Politics

Chile's Constitution was approved in a highly irregular national plebiscite in September 1980, under the military government of Augusto Pinochet. It entered into force in March 1981. After Pinochet's defeat in the 1988 plebiscite, the Constitution was amended to ease provisions for future amendments to the Constitution. In September 2005, President Ricardo Lagos signed into law several constitutional amendments passed by Congress. These include eliminating the positions of appointed senators and senators for life, granting the President authority to remove the commanders-in-chief of the armed forces, and reducing the presidential term from six to four years.

Chileans voted in the first round of presidential elections on December 11, 2005. None of the four presidential candidates won more than 50% of the vote. As a result, the top two vote-getters—centre-left Concertación coalition’s Michelle Bachelet and centre-right Alianza coalition’s Sebastián Piñera—competed in a run-off election on January 15, 2006, which Michelle Bachelet won. She was sworn in on March 11, 2006. This was Chile’s fourth presidential election since the end of the Pinochet era. All four have been judged free and fair. The President is constitutionally barred from serving consecutive terms.

Chile's bicameral Congress has a 38-seat Senate and a 120-member Chamber of Deputies. Senators serve for 8 years with staggered terms, while Deputies are elected every 4 years. The current Senate has a 20-18 split in favour of pro-government Senators. The last congressional elections were held in December 11, 2005, concurrently with the presidential election. The current lower house—the Chamber of Deputies—contains 63 members of the governing center-left coalition and 57 from the centre-right opposition. The Congress is located in the port city of Valparaíso, about 140 kilometers (84 mi.) west of the capital, Santiago.

Chile's congressional elections are governed by a binomial system that rewards large representations. Therefore, there are only two Senate and two Deputy seats apportioned to each electoral district, parties are forced to form wide coalitions and, historically, the two largest coalitions (Concertación and Alianza) split most of the seats in a district. Only if the leading coalition ticket out-polls the second-place coalition by a margin of more than 2-to-1 does the winning coalition gain both seats. In the 2001 congressional elections, the conservative Independent Democratic Union surpassed the Christian Democrats for the first time to become the largest party in the lower house. In 2005, both leading parties, the Christian Democrats and the UDI lost representation in favour of their respective allies Socialist Party (which became the biggest party in the Concertación block) and National Renewal in the right-wing alliance. The Communist Party again failed to gain any seats in the election. (See Chilean parliamentary election, 2005.)

Chile's judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and the Supreme Court. In June 2005, Chile completed a nation-wide overhaul of its criminal justice system. The reform has replaced inquisitorial proceedings with an adversarial system more similar to that of the United States.

Administrative division

Chile is divided into 15 regions, each of which is headed by an intendant appointed by the President. Every region is further divided into provinces, with a provincial governor also appointed by the President. Finally each province is divided into communes which are administered by municipalities, each with its own mayor and councilmen elected by their inhabitants for four years.

Each region is designated by a name and a Roman numeral, assigned from north to south. The only exception is the region housing the nation's capital, which is designated RM, that stands for Región Metropolitana (Metropolitan Region).

Two new regions were created in 2006: Arica and Parinacota in the north, and Los Ríos in the south. Both became operative in October 2007.

Key Name Spanish Capital XV Arica and Parinacota Región de Arica y Parinacota Arica I Tarapacá Región de Tarapacá Iquique II Antofagasta Región de Antofagasta Antofagasta III Atacama Región de Atacama Copiapo IV Coquimbo Región de Coquimbo La Serena V Valparaíso Región de Valparaíso Valparaiso VI O'Higgins Región del Libertador General Bernardo O'Higgins Rancagua VII Maule Región del Maule Talca VIII Biobío Región del Biobío Concepción IX Araucanía Región de la Araucanía Temuco XIV Los Ríos Región de Los Ríos Valdivia X Los Lagos Región de Los Lagos Puerto Montt XI Aisén Región Aisén del General Carlos Ibáñez del Campo Coihaique XII Magallanes Región de Magallanes y de la Antártica Chilena Punta Arenas RM Santiago Región Metropolitana de Santiago Santiago

Geography

A long and narrow coastal Southern Cone country on the west side of the Andes Mountains, Chile stretches over 4,630 kilometers (2,880  mi) north to south, but only 430 kilometers (265 mi) at its widest point east to west. This encompasses a remarkable variety of landscapes.

At 756,950  km² (292,260  sq mi), Chile is the world's 38th-largest country. It is comparable in size to Zambia, and is about twice the size of Japan.

The northern Atacama Desert contains great mineral wealth, primarily copper and nitrates. The relatively small Central Valley, which includes Santiago, dominates the country in terms of population and agricultural resources. This area also is the historical centre from which Chile expanded in the late nineteenth century, when it integrated the northern and southern regions. Southern Chile is rich in forests, grazing lands, and features a string of volcanoes and lakes. The southern coast is a labyrinth of fjords, inlets, canals, twisting peninsulas, and islands. The Andes Mountains are located on the eastern border. Chile is the longest (N-S) country in the world (over 4,200 km (2,610 mi)), and also claims 1,250,000 km² (482,628 sq mi) of Antarctica as part of its territory. However, this latter claim is suspended under the terms of the Antarctic Treaty, of which Chile is signatory.

Chile controls Easter Island and Sala y Gómez Island, the easternmost islands of Polynesia, which it incorporated to its territory in 1888, and Robinson Crusoe Island, more than 600 km (373 mi) from the mainland, in the Juan Fernández archipelago. Easter Island is nowadays a province of Chile. Also controlled but only temporally inhabited (by some local fishermen) are the small islands of Sala y Gómez, San Ambrosio and San Felix, these islands are notable because they extend Chile's claim to territorial waters out from its coast into the Pacific.

Climate

The climate of Chile comprises a wide range of weather conditions across a large geographic scale, extending across 38 degrees in latitude, making generalisations difficult. According to the Köppen system, Chile within its borders hosts at least seven major climatic subtypes, ranging from desert in the north, to alpine tundra and glaciers in the east and south east, humid subtropical in Easter Island, Oceanic in the south and mediterranean climate in central Chile. There are four seasons in most of the country: summer (December to February), autumn (March to May), winter (June to August), and spring (September to November).

Time zones

Because of the distance between the mainland and Easter Island, Chile uses 4 different UTC offsets:

• The mainland uses UTC-4, and in summer as daylight saving time UTC-3.
• Easter Island uses UTC-6, and in summer as daylight saving time UTC-5.

Economy

After a decade of impressive growth rates, Chile began to experience a moderate economic downturn in 1999, brought on by unfavorable global economic conditions related to the Asian financial crisis, which began in 1997. The economy remained sluggish until 2003, when it began to show clear signs of recovery, achieving 4.0% real GDP growth. The Chilean economy finished 2004 with growth of 6.0%. Real GDP growth reached 5.7% in 2005 before falling back to 4.0% growth in 2006. Higher energy prices as well as lagging consumer demand were drags on the economy in 2006. Higher Chilean Government spending and favorable external conditions (including record copper prices for much of 2006) were not enough to offset these drags. For the first time in many years, Chilean economic growth in 2006 was among the weakest in Latin America. GDP expanded 5.1% in 2007.

Chile has pursued generally sound economic policies for nearly three decades. The 1973-90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization, though at a slower pace. The government's role in the economy is mostly limited to regulation, although the state continues to operate copper giant CODELCO and a few other enterprises (there is one state-run bank). Chile is strongly committed to free trade and has welcomed large amounts of foreign investment. Chile has signed free trade agreements (FTAs) with a whole network of countries, including an FTA with the United States, which was signed in 2003 and implemented in January 2004. Over the last several years, Chile has signed FTAs with the European Union, South Korea, New Zealand, Singapore, Brunei, China, and Japan. It reached a partial trade agreement with India in 2005 and began negotiations for a full-fledged FTA with India in 2006. Chile conducted trade negotiations in 2007 with Australia, Malaysia, and Thailand, as well as with China to expand an existing agreement beyond just trade in goods. Chile hopes to conclude FTA negotiations with Australia and the expanded agreement with China in 2008. Negotiations with Malaysia and Thailand are scheduled to continue throughout 2008. The members of the P4 (Chile, Singapore, New Zealand, and Brunei) also plan to conclude a chapter on finance and investment in 2008. The economic international organization the OECD agreed to invite Chile to be among four countries to open discussions in becoming an official member.

High domestic savings and investment rates helped propel Chile's economy to average growth rates of 8% during the 1990s. The privatized national pension system (AFP) has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 21% of GDP. However, the AFP is not without its critics, who cite low participation rates (only 55% of the working population is covered), with groups such as the self-employed outside the system. There has also been criticism of the inefficiency and high costs due to a lack of competition among pension funds. Critics cite loopholes in the use of pension savings through lump sum withdraws for the purchase of a second home or payment of university fees as fundamental weaknesses of the AFP. The Bachelet administration plans substantial reform, but not an overhaul, of the AFP during the next several years.

Unemployment stubbornly hovered in the 9%-10% range after the start of the economic slowdown in 1999, above the 7% average for the 1990s. Unemployment finally dipped to 7.8% for 2006, and has kept falling in 2007, averaging 6.8% monthly (up to August). Wages have risen faster than inflation as a result of higher productivity, boosting national living standards. The percentage of Chileans with household incomes below the poverty line—defined as twice the cost of satisfying a person's minimal nutritional needs—fell from 45.1% in 1987 to 13.7% in 2006, according to government polls. Critics in Chile, however, argue true poverty figures are considerably higher than those officially published, due to the government's use of an outdated 1987 household budget poll, updated every 10 years. According to these critics, using the 1997 household budget data, the poverty rate rises to 29%. Using the relative yardstick favoured in many European countries, 27% of Chileans would be poor, according to Juan Carlos Feres of the ECLAC. Despite enjoying a comparatively higher GDP and more robust economy compared to most other countries of Latin America, Chile also suffers from one of the most uneven distributions of wealth in the world, ahead only of Brazil in the Latin American region and lagging behind even of most developing sub-Saharan African nations. Chile's top 10 richest percentile possesses 47 percent of the country's wealth. In relation to income distribution, some 6.2% of the country populates the upper economic income bracket, 15% the middle bracket, 21% the lower middle, 38% the lower bracket, and 20% the extreme poor.

Chile's independent Central Bank pursues an inflation target of between 2% and 4%. Inflation has not exceeded 5% since 1998. Chile registered an inflation rate of 3.2% in 2006. The Chilean peso’s rapid appreciation against the U.S. dollar in recent years has helped dampen inflation. Most wage settlements and loans are indexed, reducing inflation's volatility. Under the compulsory private pension system, most formal sector employees pay 10% of their salaries into privately managed funds.

Total foreign direct investment (FDI) was only $3.4 billion in 2006, up 52% from a poor performance in 2005. However, 80% of FDI continues to go to only four sectors: electricity, gas, water and mining. Much of the jump in FDI in 2006 was also the result of acquisitions and mergers and has done little to create new employment in Chile. The Chilean Government has formed a Council on Innovation and Competition, which is tasked with identifying new sectors and industries to promote. It is hoped that this, combined with some tax reforms to encourage domestic and foreign investment in research and development, will bring in additional FDI and to new parts of the economy. As of 2006, Chile invested only 0.6% of its annual GDP in research and development (R&D). Even then, two-thirds of that was government spending. The fact that domestic and foreign companies spend almost nothing on R&D does not bode well for the Government of Chile’s efforts to develop innovative, knowledge-based sectors. Beyond its general economic and political stability, the government also has encouraged the use of Chile as an "investment platform" for multinational corporations planning to operate in the region, but this will have limited value given the developing business climate in Chile itself. Chile's approach to foreign direct investment is codified in the country's Foreign Investment Law, which gives foreign investors the same treatment as Chileans. Registration is simple and transparent, and foreign investors are guaranteed access to the official foreign exchange market to repatriate their profits and capital.

Foreign trade