How to get back on the growth path? This is a frequent question in Chile, and LarrainVial Asset Management, one of the leading investment houses in the Andean country, made it the central focus of the latest edition of its annual seminar. To address this, the event—celebrating the 90th anniversary of the investment house’s founding—offered a variety of perspectives, including reflections on the economy, society, and culture in the country.
After a welcome speech from Ladislao Larraín, the general manager of the firm, and an introduction by José Manuel Silva, partner and investment director of the firm, the audience at the W Hotel in Santiago received Sergio Urzúa, economist and professor at the University of Maryland and Clapes UC; María Olivia Recart, economist, former undersecretary of state at the Ministry of Finance and President of Comunidad Mujer; and Cristián Warnken, professor of literature, writer, and communicator.
The three guests at the event analyzed the factors explaining the weak performance of the Chilean economy in recent years and the measures that can be taken in response.
Lost Time
“We must hurry in the search for lost time,” warned Sergio Urzúa in his presentation, calling for “awareness” about the local economy’s situation and the “squandering” the country has done with it, in his view.
The deterioration of the economic momentum in the Andean country, the economist noted in his presentation, began in 2014 and is “a local phenomenon,” not a global one. Additionally, he pointed out, there has been a significant “institutional deterioration.” A reflection of this, he indicated, is the gradual reduction in the country’s credit rating.
What happened? “Anxiety is what played against Chile,” he said, referring to a change in the population’s mindset that led the economy “from jaguar to polar bear,” according to the economist’s analogy.
Some particular variables, he asserted, constitute “silent tax reforms”: the burden on human capital, with various factors impacting potential growth; organized crime, which is becoming a sort of tax equivalent to around 5% of GDP; and the “tax agreement in the living room,” where the fall in real income and the rise in the price per square meter have led 35% of people aged 25 to 35 to live with their parents or in-laws.
Looking ahead, the economist called for “accepting the loss,” acknowledging the lost economic dynamism to bring about change. Additionally, Urzúa urged focusing on three key factors: investment, employment, and education.
We must act now, in the economist’s view, noting that only 5% of countries that have had similar “economic slowdowns” to Chile have managed to reverse them. “Let’s start acting. Let’s set goals,” he indicated.
The Distribution Problem
“To grow again, we need to improve income distribution,” said María Olivia Recart as she took the stage. The issue of equity, she assured, is fundamental to achieving sustainable economic growth.
In this sense, the economist indicated that while it is necessary to address the issue of slow permits in the country, the business sector also has a role to play. “It’s not just about unlocking public policies,” she commented, but companies also need to have a long-term vision to prepare for future threats.
Regarding work, the professional emphasized that there is a “huge gap” in women’s labor participation, with career paths diverging from men’s after having children due to the burden of childcare. “We need universal daycare,” urged the professional.
Additionally, she noted, there is an education problem that goes beyond the public sector. “Our training systems are in crisis,” the economist indicated, adding that “it’s the system. Not just public education.”
Regarding the productivity problem in the country, Recart said that “we must start from the micro and go to the macro.” It’s not just about modernizing the state, she commented, but there are also shortcomings in business management. Especially considering the contextual factors on the table, such as climate change, artificial intelligence, labor market informality, and the deterioration of democracy worldwide.
What remains to be done in the short term, then? For Recart, five key points are: focusing on things that directly affect people, such as service quality in companies and ease of procedures; creating social value; more dynamic public policies; impacts on specific groups; and looking at resilience variables, such as water usage.
The Cultural Factor
The diversity of the panel was expanded by the participation of Chilean intellectual Cristián Warnken, who replaced PowerPoint presentations with a selective pile of books and opened his presentation with a quote from “The Divine Comedy” by Italian poet Dante Alighieri.
The writer and communicator used the protests that marked a long period of political turbulence in Chile, known locally as the “social outbreak,” as an illustrative case. “There is a relaxation of the elites,” he indicated at the LarrainVial event, emphasizing that the elites have “responsibility” in the upheavals.
For the thinker, in addition to a relaxation of “ethical barriers”—with notorious cases of collusion and corruption, for example—the disconnection of the ruling social classes meant that no one could foresee the advent of the protests. And the interpretations were also disparate in the political sphere: while the left saw the process as a demand for revolution, the right chose to deny the existence of popular discontent.
“We are left without a narrative, we are left without leaders,” Warnken said, adding that “crises are not just political and economic” but also spiritual and cultural. In this sense, the thinker assured that Chilean society is currently seeing the effects of phenomena such as the impoverishment of education and the deterioration of civic culture.
What comes next? For the literary figure, “we need order,” but one that is “framed within another order.” In this vein, he called for caution against authoritarianism: “We don’t need a Bukele. Get that out of your heads.”
