Lessons We Can Learn from Chile

Feb. 8.09 | About: iShares MSCI (ECH)

By Kindred Winecoff

What can we learn from Chile? Quite a lot, says Kaufmann of the World Bank:

To respond to the economic slowdown, the government has put together a counter-cyclical stimulus plan of about US$ 4 BN, being in a comfortable position to use the vast reserves (amounting to about US$21 BNs) accumulated in its stabilization fund during the surplus years. Thus, there is a solid macro-economic basis for this stimulus plan. Contrast this with what Argentina has done, for instance, where the government has raided the private pension funds!

The micro-economics of the stimulus package of Chile is also sound and worth looking into, since its composition is rather effective. It balances the needs of infrastructure, small enterprise development, and low income households. A notable absence in the package, which is worth emphasizing in the US today, are footprints from corporate (and lobby) capture by vested interests or pork barrel politics (and obviously there is no 'Buy Chilean' provision!).

More

here

and also

here

. We hear a lot about how Sweden and Japan have responded to past episodes, but mush less about other countries. To be sure, there are major differences between Chile and the U.S., so a direct comparison isn't wise. But that doesn't mean that lessons can't be learned.