Chile: Political and Economic Conditions and U.S. Relations

Publication Date: August 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Government

Type:

Coverage: Chile

Abstract:

A South American nation with a population of about 15 million, Chile returned to democratic rule in 1990 after 17 years of military government. The current administration of President Ricardo Lagos, inaugurated in March 2000 to a six-year term, is Chile's third elected government since the return to civilian rule. Chile has weathered the transition to democracy well, although civil-military relations have been tense at times. The October 1998 arrest of former military ruler General Augusto Pinochet in London on human rights violations exacerbated political schisms in Chile, but in the end, Chilean democracy appears to have emerged stronger with the civilian government more firmly in charge of the military.

Chile is generally recognized as a model for the successful implementation of market-oriented economic reform measures, and there has been political consensus in the country on maintaining a liberal market economy and prudent fiscal and monetary policies. The Lagos government has continued the country's exportoriented economic strategy. The economy registered positive growth rates from the mid-1980s through 1998 but contracted in 1999 because of the Asian economic crisis. In 2000, the economy rebounded, but economic growth slowed in 2001 and in 2002 because of the global and regional economic slowdown. Economic growth is forecast to increase by 3.5% in 2003 and 4.5% in 2004, fueled by improvement in consumer and investor confidence and Chile's trade liberalization efforts.

U.S. relations with Chile, which improved considerably with the nation's return to democracy in 1990, are close, characterized by strong commercial ties and extensive consultation between the two governments on bilateral and other issues of mutual concern. Since 1994, U.S.-Chilean relations have centered on a potential free trade agreement (FTA). Negotiations for such an agreement began in December 2000 and concluded in December 2002, with the agreement signed on June 6, 2003. The U.S. Congress considered implementing legislation, H.R. 2738, under so-called fasttrack procedures, with the House passing the measure July 24 by a vote of 270-156 and the Senate approving it July 31 by a vote of 66-31. The Chilean Congress is expected to vote on the agreement by late October or early November. Another issue in bilateral relations has been the sale of advanced combat fighter aircraft to Chile. A preliminary agreement was reached between the Chilean military and Lockheed Martin for the purchase of 10 F-16 fighter jets in November 2001, but the contract for the planes was not finalized until May 2003; delivery is expected in early 2006.

For more information, see: CRS Report RL31144, A U.S.-Chile Free Trade Agreement: Economic and Trade Policy Issues; CRS Report RS21560, Free Trade Agreements with Singapore and Chile: Labor Issues; CRS Electronic Briefing Book, Agriculture, "Agriculture in the U.S.-Chile Free Trade Agreement" at [http://www.congress.gov/brbk/html/ebagr53.html]; CRS Electronic Briefing Book, Trade , "Immigration Issues in the Free Trade Agreements " at [http://www.congress.gov/brbk/html/ebtra135.html]; and CRS Report 95-839, Social Security: The Chilean Example.