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Natural resource driven growth reaching limits in Chile

Geoff Riley

22nd July 2016

The natural resource-based economic model is starting to show its limits says a new review of the Chilean economy published by the OECD. And Chile must implement measures to stem environmental pressures according to the OECD analysis.

Chile is a really good economy to study to consider some of the opportunities and constraints that come from remaining heavily dependent on natural resources which is Chile's case means copper! The good news for Chile - which is the most resource-intensive economy among OECD nations - is that the country is seeing a boom in spending on investment in renewable energy. They are improving environmental institutions and introducing new instruments, including a carbon tax.

The Chilean economy has enjoyed strong growth in recent years and has made substantial progress in reducing extreme poverty. But world copper prices have been falling causing a deterioration in the Chilean terms of trade. Chile is a relatively low tax country and now a member of the OECD growth of advanced countries. But Chile also has the highest income inequality within OECD not least because of the uneven distribution of income from mining copper resources.

The OECD report focuses on a number of key environmental challenges facing the economy:

" Chile suffers from persistently high air pollution in urban and industrial areas, water shortages and pollution, habitat loss and vulnerability to climate change. More than 95% of its waste continues to be landfilled." But a positive development is that "Chile has nearly a fifth of its land area under nature protection and is planning to build the largest marine park in the Americas."

Read more about the Chilean economy and environmental issues using this link

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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