When will DR get its Buchi?

http://www.hacer.org/chile/?page_id=2

Chile’s economic development is a source of admiration that should be studied throughout the world. There are many that contributed to this economic success story, however, none more in depth than this firsthand account by one of the protagonists of this story – Hernán Büchi. As a former Minister of Finance in Chile, Büchi was responsible for many of the reforms that have allowed Chile to become a model of economic development for the region, and more importantly a benchmark of success for the rest of the developing world to aspire, study, and hopefully emulate.

Buchi’s book recounts the major economic transformation undertaken by Chile in the eighties, and takes the readers through this journey by explaining the characteristics and complications of such reforms. Büchi’s careful handling of this transformation has led Chile through a process of recovery, which marked the beginning of their long growth period.

We are now inspired to tell the Chilean story to a broader audience by translating Büchi’s book into English and promote Chile’s path to reform as a way to increase the respect and understanding of a free society around the world.


Hernan Büchi is one of the major architects who solidified free-market reforms in Chile. An economist by training, he is considered to be one of the world’s foremost experts on the issue of utilities deregulation.He founded the Institute of Liberty and Development (ILD), a Chilean think tank dedicated to the study of public policy from the perspective of the free society. He currently directs ILD’s Center for International Economics.

Mr. Büchi is a well-renowned international lecturer and is a member of the board of directors of a number of private companies in Chile. He has served in the government of Chile as Undersecretary of the Economy (1979-80), Undersecretary of Health (1980-83), Minister of Planning (1983-84), Superintendent of Banks and Financial Institutions (1984-85), and Minister of Finance (1985-89). In 1989, he ran as a presidential candidate for the centre-right Democracy and Progress Party.

Since 1990, Mr. Büchi has advised a number of governments in Latin America, Eastern Europe, and Asia in designing and implementing economic policies.

List Of Main Reforms In Which Mr. Büchi Participated Or Directed:
# Tariff reform and trade liberalization.
# Price liberalization reforms; new mechanisms to define prices of electricity, water and sewage, etc.
# Tax reforms: value added tax reform and implementation, income tax reform, etc.
# Deregulation; design and implementation of market oriented rules in the real sector of the economy: transport, commerce, industry, mining, agriculture, port system, energy, water and sewerage system services, etc. In the case of mining a new mining code was enacted
# Public enterprise restructuring.
# Privatization of public enterprises.
# Capital market reforms :
- restructuring of the banking system.
- insurance companies.
- mutual funds and other financial intermediaries.
# Foreign investment law reforms.
# Labor legislation reforms.
# Design and implementation of a modern social network; pensions for poor people, family subsidies, etc
# Educational system reforms. Creation of a financing scheme based on financing demand. Liberalization of the university system.
# Health system reforms: decentralization and creation of a private health system.
# Pension system reform. Creation of a privately administrated pension system.
# Reforms to the financing scheme of the public housing programs
# Implementation of an independent central bank.
# External debt conversion and capitalization mechanisms.

The Economic Transformation of Chile is a book written by Hernán Büchi, a Chilean economist. He was Minister of the Treasury from 1985-1989. He details his experiences of the long process of introducing pro-free market reforms to the Chilean economy. The effects of those reforms have helped lift Chile out of poverty and to have transformed it into a largely globalized world economy, making it into the first Latin American country to be accepted as a member of the Organisation for Economic Co-operation and Development[1] (OECD).

Because of Büchi's crucial role as a decision-maker in this historical turning point for Chile, the book allows us to learn first hand about the successes and obstacles that he experienced, being closer than anyone else to the policies that turned a country once bent on the road to socialist serfdom[2], into the beacon of prosperity and economic freedom it is today [3].

As a consequence of the Chilean economic transformation, it now has the lowest poverty level in the entire Latin American region [4]; this fact that resounds when compared to other countries in the region, such as Venezuela[5] and Cuba [6], that, while purportedly following an economic model based on state-controlled industries to enforce "solidarity" and "social justice", have only managed increase poverty and crime. The original version of the book was originally written and published in Spanish, in 1993, by Editorial Norma, and was titled "La transformación económica de Chile: Del estatismo a la libertad económica"[7]; it has been significantly expanded and updated for its English translation, which was published in 2010 by the Hispanic American Center for Economic Research (HACER).


The book consists of eleven chapters, being enumerated below. The contents and a quote for each of the corresponding chapters can be found below each title.

Chapter 1: Summer of 1975

"Economic liberalization in Chile had to overcome tremendous adversity: generalized international hostility toward the military government and negative external conditions for the prices of the country's exports, coupled with financial difficulties. However, these same circumstances held one great advantage: rejection and isolation killed any illusions about any alternative models for development. Such alternative models have been the death of many other Latin American governments, which were confident - as seems to be the case of Raúl Alfonsín's administration in Argentina (1983-1989) -[B] that they could solve their economic problems based on the sympathies of world public opinion and international "solidarity". Such internationalist utopian dreams turned out to be groundless and foolish. Dependency on international economic aid and handouts from rich nations is not only humiliating, but also fundamentally unproductive."[/B] - Büchi, pp.12-13

The Mark of Messianic Socialism. Socialism was in Chile before Allende. Commitment by the Government: The Roadmap. Can the model be replicated?


Chapter 2: Of Miracles and Programs

[B]"Chile did not invent the wheel: the true road to development has been known for many years. The originality of the Chilean experience was not to be found in the contents of the economic program as much as in the courage it took to set out on a lonesome and difficult path at a time when the rest of Latin America was going in the opposite direction. It was also to be found in the decision to advance toward a free economy even though the country had set out on the path toward state control and socialism a long time ago, well before Allende's time.[/B]

This is what makes the Chilean experience remarkable:[B] to have embarked on a process to reform and revive the economy that went against programmatic illusions then prevailing throughout the region. From socialism to populism, these illusions all shared a strong belief in state intervention and in the revitalizing effect of expansionary monetary policies - both of which went against all historical evidence." [/B]- Büchi, pp. 16-17

Precedents: Who Invented the Wheel? The Two Faces. The Ingredients of Success. Change and Consensus. From Words to Action. A Few Observations. The Questions.


Chapter 3: The First Dilemmas

"... these changes were crystallized into a program in 1972 and 1973 in a document known as El Ladrillo , produced after extensive research and discussion by a large group of professionals. This group was convinced that Allende's government, far from representing a detour in the evolution of [the] Chilean economy, was simply the final step in a way of thinking that had taken over the management of the country long before - several decades before.

While the country heads towards a grave crisis, perhaps nothing would be as decisive to the course that the country would take as that group's seemingly Byzantine discussions. Again, as noted, El Ladrillo [The Brick] reflected the process that shaped a critical and intellectual consciousness in people who were tired of being asked to believe in fantasies. These people - distancing themselves from the alarmist rhetoric of those years and from the socialist triumphalism then prevalent - made a vital contribution toward changing Chile's reality and destiny" - Büchi, pp. 32-33

Liberal Consciousness and Criticism. Where was Shock Therapy Applied? External Opening-Up. Exchange Policy. Monetary Redemption. Government Revenues and Spending. The Totalitarian Script. The People Behind the Numbers. Lessons from the Chilean Experience.

Over.

Chapter 4: The Real Modernizations

"Among the numerous lessons from the Chilean experience is the realization that reforming the Constitution is insufficient if regulations remain unchanged. Cleaning up the superstructure is insufficient if, as far as workers' everyday experiences are concerned, the weeds of state control continue to grow. The ruler who never leaves the realm of principles and grand political guidelines will gain little if he does not come down to ground level, where people are really in touch with the nation's problems." - Büchi, p. 52

Regulations and Property: The Pillars of the Market. Guaranteed Success? Agriculture. Mining. Energy. Forestry. Water Management. Fishing. Telecommunications. Transportation. Government Reform.


Chapter 5: Work, Capital and Freedom

"After moving in one direction for decades, turning in the opposite direction is not easy. It is not easy to internalize that yesterday's truths and core concepts were mistaken. I remember a question asked by Chilean labor lawyer to a government official in Hong Kong during a visit by a Chilean government and business mission to that country in the late seventies. They showed us impressive evidence of the economy's dynamism, and the lawyer asked: "Yes, that's all very well, but what is the minimum wage and where are the laws protecting workers?" The official, without batting an eyelid, answered with another question: "Do you want us to suffer unemployment? With the enormous amount of Chinese immigrants that we have annually, and the terrible poverty conditions in which they come to our country, our challenge is to expand employment, not obstruct it." - Büchi, p. 95

The Labor Market. Pension Reform. The Capital Market. A Diagnosis on the 1983 Crisis.


Chapter 6: Opting for Human Capital

"There is a perverse feedback effect between certain bad political habits and the cycles of dependency and poverty. This is the case at many levels. Education ministries in Latin America have long been a kind of public relations service for the teachers' unions. The truly important decisions that they make do not cater to the contents of educational plans; they cater to wage increases every two or three years due to inflation, or to issues that took up most of the minister's time and energy - issues which, while important, should not be the only ones or the priorities in an education policy." - Büchi, p. 119

Housing and the Market. Education. Health Freedom. There Was More to the Social Safety Net.


Chapter 7: Reform becomes Law

"If legislators were made to forget the present and look toward the future, their perspective would necessarily change. No one would want to promote a misguided labor law if he knew beforehand that it would hurt employment in the future. Legislators tend to write faulty laws because they think it will benefit people who are working today. They either neglect or underestimate the effect that such a law will have on people who will need jobs tomorrow.

On the other hand, laws and constitutions will be ineffectual if their text contradicts the prevalent perceptions and beliefs of a society. Were that to happen, courts would end up interpreting regulations in order to suit the preferences and priorities of the society in question." - Büchi, p. 143

Perverse Legislation. Simple Truths and General Principles. Other Times. Isolated Observations.


Chapter 8: Time of Crisis

"There were no easy solutions. Therefore, the task the country needed to undertake was to retake the initiative on behalf of a free economy, which required perseverance and hard work. It was not a question of moving just one economic variable. All of the variables had to be dealt with simultaneously and in coordination in order to put the country back on the path of sustained and sustainable development." - Büchi, p.164-165

Dollar inflows. What went wrong? Two Factors. Unanswered Questions. A Rift in the Team. Fatal Convergence. The Government's Actions on other Economic Agents. Reflections from a Distance.


Chapter 9: How to get the Economy back on its Feet

"Until 1984, many people believed that Chile's problem was mainly due to external debt, which they believed could be addressed through what was known as a "good negotiation" with the IMF. My administration quickly put aside this perception, because the problem lay not with the IMF. The problem was ours. When a business is in a difficult situation because its operations are becoming unsustainable, its main challenge lies not in getting more funds or an extension on financing. The challenge is to sort out the enterprise, in order to achieve a positive cash flow. Within this perspective, endless renegotiation of debt schedules made no sense unless the country corrected its own imbalances and dysfunctional structures." - Büchi, p. 177

The Diagnosis. A Weak, Broken-Down Engine. The External Debt. To Grow, but in Stability. The Authority of Detail. The Tools of Recovery. The Road to Privatization. Outcomes.


Chapter 10: After the Battle

"...my firmest recommendation to those in a position to carry out market reforms is to avoid delay. In the end, time available to economic policy makers is always short. The task is so vast that there will always be challenges left unresolved, but the important thing is to leave lasting solutions for as many of the country's challenges as possible... The opportunities to modernize, to liberalize, and to clear paths to development come around only once." - Büchi, p. 187
And here was DR's great downfall: We HAD A GOLDEN OPPORTUNITY IN 1966 AND BALAGUER BLEW IT!! DR COULD HAVE CREATED AN EXPORT LED GROWTH MODEL!! BEFORE 1970!! CAN YOU IMAGINE WHERE WE WOULD BE TODAY HAD THOSE FOOLS ACCEPTED THE OFFER?

Chapter 11: The Model Endures

"The lengthy period of time during which the Chileans have experienced a free market economy has allowed them to appreciate the advantages of progress, or at least get a closer look at them. This is especially important for young people. People who have tried to convince them that it is possible to take shortcuts - that individual responsibility and a job well done are not the main ingredients of success - have lost credibility. Solutions based on greater state intervention and social engineering, such as the public transport reform in Santiago, have been spectacular failures. The evidence is overwhelming: one just needs to look at neighboring countries..." - Büchi, p. 206

The Guidelines are Preserved. Two Minds. Part of the Culture. Two Post-1990 Periods. The Inertia is

hopefully, the DR will never get a Buchi. with the passage of time, you have proven yourself to be a shallow, unschooled sycophant of neoliberal policies, and believer in smoke and mirrors miracles, such as the one in Chile, which, as any guy who went to school and did a year of economics knows was just a manipulation of the data from the business cycle. steep recessions beget rapid recoveries...any kindergarten economics student knows that. with Chile oscillating between peaks and troughs, some recoveries looked spectacular. just like the fact that the highest peacetime increase on record regarding the US economy was the 14.2 percent rise somewhere during the mid thirties. that does not mean everyone was eating filet mignon, just that it was so bad before, anything would look good. so, when Pinochet took over in 73, and in 2 years inflation hit 351%, of course any remedy will probably look better. and yes, when you have a bank interest rate of 57%, you will attract foreign investment. you juts happen to kill off all local small businessmen, who cannot work in that environment. so, you get an economy that is top heavy in financial services, produces nothing but primary products, and has two classes..the filthy rich, and the desperately poor. it would help if you got a basic insight into economics before you post your bullcrap neoliberal articles. the DR does not need any Buchi.

and, Atabey, i see where instead of either answering my question on Friedman, or conceding that you cannot, you have decided to resort to the use of intellectual surrogates, bombarding the board with the ideas of his conceptual fellow travellers, like Buchi. underhanded, and tacky, but, in your case, predictable.

Dread, you appear to again mistake intellectual interplay with coming to terms with past failures on your part in social engineering? Chile has moved vastly forward in its modernization process. Again, this does not mean that a Nirvana State has arrived; the GINI co-efficient is still high, but remember, it's part of our Latin heritage and needs to be corrected. Hopefully in the not too distant future a more balanced social contract will arise, perhaps current and future generations of great wealth generators in Chile will follow the examples of major philanthropic organizations and promote through good works this better society. But again, this will take place via consensual agreement, not through central government dictates.

"After moving in one direction for decades, turning in the opposite direction is not easy. It is not easy to internalize that yesterday's truths and core concepts were mistaken. I remember a question asked by Chilean labor lawyer to a government official in Hong Kong during a visit by a Chilean government and business mission to that country in the late seventies. They showed us impressive evidence of the economy's dynamism, and the lawyer asked: "Yes, that's all very well, but what is the minimum wage and where are the laws protecting workers?" The official, without batting an eyelid, answered with another question: "Do you want us to suffer unemployment? With the enormous amount of Chinese immigrants that we have annually, and the terrible poverty conditions in which they come to our country, our challenge is to expand employment, not obstruct it." - Büchi, p. 95

In this exchange you are the Chilean labor lawyer and I'm the Chinese official

All my information is that the Chilean government has bought off certain people and the poor get poorer.

Chile: Tambillo Miners on Strike - Need Your Support


(Tambillo miners outside the pit)
103 miners from Tambillo, a small mining village in the region of Coquimbo in Chile, have been on official strike since May 1st. By the middle of August they had been out for over 100 days without pay in the longest strike in Chile since the restoration of democracy in 1990.
The pit is owned by one of the largest capitalists in Chile, Francisco Javier Errazuriz, a well known Pinochet supporter, anti-union right winger. As well as the Tambillo mine Errazuriz owns a chain of super markets called Unimarc and Errazuriz wines, which are sold worldwide. Miners are calling for a boycott of all of Errazuriz interests. Luis Robles the miners official spokesperson said:

“Errazuriz doesn´t know the miners whose work makes him rich. He never gives back to the community, to the school, or makes pension contributions. He just uses us for working in his mines and exploits the public infrastructure of Tambillo to transport his copper. It would be great to work in a mine controlled by the miners themselves.”

Miners go on strike
The strike began following the failure of the annual pay negotiations in April. Errazuriz demanded that the Tamibillo miners accept a 35% pay cut. If the miners wanted to maintain their pay at its original level, then wages could be made up through bonuses, which if not reached would result in the sack.
The miners rejected the pay offer and held a mass meeting of all union members. Of 104 present 101 voted in favour of a strike from May 1st. Errazuriz responded by illegally withholding the miners April pay and bonus and sacking 50 non-union miners on the spot. Since then Errazuriz has refused to negotiate or meet with the strikers.

Police attack the strike
The strike is solid, but the miners are suffering constant police surveillance and harassment, which turned into a brutal assault, when the police moved to break up a peaceful protest outside the pit entrance in June. Miners, their families and children had gathered to support a 10 day hunger strike of three miners and two university students. Police used water cannons, baton charges and tear gas to break up the protest, chasing miners, their wives and children through Tambillo village on motor bikes.

The miners are actively supported by their wives who take part in the daily picket, organise welfare activities and publicise the strikers demands, even while they are struggling to provide food and bus fares for their children to attend school.

Errazuiz under arrest
The miners have successfully taken Errazuriz to court, where he was found guilty of breaching trade union law and ordered by the magistrate to pay the miners April pay and bonus in full and fined for his anti-union activities. Errazuriz was given three days to pay pending an order for his immediate arrest.

Solidarity
The miners of Tambillo, are determined to fight on until their ay cut is withdrawn and the pay claim met in full. A victory for them would be a victory for all workers, and particularly the most exploited miners in Chile´s copper industry. But the miners need the solidarity of all other workers world wide. They have no strike pay and are surviving on a very minimal income they are totally reliant on donations and collections from other workers in order to maintain their fight.

Any messages of support can be send to my email; luis.robles.operador@hotmail.es the official spokesperson of the miners union and to the trade union blog.

Send financial contribution to:

Bank account number: 0-017-04-51614-9
BANCO SANTANDER BANEFE (CHEQUERA ELECTRONICA) Chile.

There is more information about the miners strike at the Tamibillo miners web page here.

www.sindicatoscmtambillos.blogspot.com

And on these videos:


http://www.youtube.com/watch?v=iqqFkFptY3c
http://www.youtube.com/watch?v=pPlM59yih70
http://www.youtube.com/watch?v=kUtLdZTDn2o http://www.youtube.com/watch?v=kLQsLrHt4Ko&feature=PlayList&p=A228E9A4DE5CB52C&playnext=1&playnext_from=PL&index=13
http://www.youtube.com/watch?v=5dtbMf6vD3M
http://www.youtube.com/watch?v=3OSiNOFnh6I&feature=related

Fraternally yours
Luis Robles
Tambillo Copper Miners Union

S.