DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B – POLICY DEPARTMENT – NOTE ON RELATIONS BETWEEN CHILE AND THE EUROPEAN UNION Summary: After 16 years of dictatorship between 1973 and 1989, Chile began a process of democratisation under the authority of the military. That process culminated in August 2005, when the Congress adopted a reform of the Constitution that had been imposed in 1980 by General Pinochet’s government. This political success has been mirrored by good economic progress, which is largely the result of structural reforms. These have helped open up the economy, which has been strengthened via the implementation of several free-trade agreements and by focusing on national production. In January 2006 Michelle Bachelet won the Presidential elections. It is an unprecedented event for a woman to achieve such a high position in the Southern Cone. Her priority areas will be health, education and the reduction of poverty. Relations between the EU and Chile in terms of politics, the economy and cooperation are excellent. The association agreement concluded in 2002 has done much to strengthen relations between the two partners, and the fields of activity to which the agreement applies have increased as a result. DGExPo/B/PolDep/Note/2006_138 September 2006 EPADES\DELE\D-CL\NT\628801EN 1 PE 378.960EN This note was requested by the Delegation to the EU-Chile Joint Parliamentary Committee. It is available in the following languages: English Author: Pedro NEVES Manuscript completed in September 2006. To obtain copies, please email [email protected] European Parliament, Brussels, September 2006. The opinions expressed herein are those of the author and do not necessarily reflect the position of the European Parliament. Sources: Economist Intelligence Unit (EIU) European Commission Eurostat Reuters Global Insight EPADES\DELE\D-CL\NT\628801EN 2 PE 378.960EN CONTENTS Page I. POLITICAL SITUATION...................................................................................................4 II. ECONOMIC SITUATION. ...............................................................................................15 III. RELATIONS BETWEEN THE EU AND CHILE............................................................21 ANNEXES EPADES\DELE\D-CL\NT\628801EN 3 PE 378.960EN I. POLITICAL SITUATION 1. Introduction 1.1 Geographical location In the Aymara language the word Chile means ‘the place where the earth ends’, and the country has a curious geography: from Peru to its southernmost tip it is 4.330 km long and never more than 362 km wide1. The country is located in the south-west of South America, bordered to the north by Peru, to the east by Bolivia and Argentina, and to the south and west by the Pacific Ocean. Several archipelagos (the Chonos archipelago, Wellington Island and the western part of the Tierra del Fuego) extend along Chile’s southern coast from Chiloé Island to Cape Horn. The total surface area of the country is around 756.950 km2. Chile’s population is relatively homogenous compared to other South American countries, and the country has 16.1 million inhabitants, over a third of whom live in Santiago, the capital. The landscape is dominated by the Andes, a long mountain range which runs the length of the country from the Bolivian plateau in the north to the Tierra del Fuego in the south. Chile can be divided longitudinally into three types of landscape: the Andean Cordillera in the east, the plateau area of the Central Valley, and coastal mountain ranges in the west. In the central region, the plateau gives way to the Central Valley, which is around 965 km long and 40-80 km wide, and which is the most heavily populated region of the country. The fertile depression between the Aconcagua and Bío-Bío rivers forms the agricultural heartland of Chile. The country may be divided into three climatic regions: the arid north, the Mediterranean-like central region and the temperate oceanic south. The northern region is almost entirely desert, and the Atacama desert is one of the driest in the world. Temperatures, however, are moderated by the altitude and by the offshore presence of the cold Humboldt Current from Peru. 1.2 Historical background The first inhabitants of Chile came from Asia via the Bering Strait. Various Indian tribes spread throughout the land, and as Chile’s unique geography made it unappealing to conquerors, the various Indian tribes lived in harmony for many years. In 1520, Fernand de Magellan was the first to catch sight of Chile shortly after he sailed through the strait which today bears his name, but he did not go ashore, instead carrying on towards the Philippines. In 1540, Pedro de Valdivia founded Santiago, and although several months later the town fell under the attacks of the mapuches (Indians), they could be brought under control relatively quickly. The Indians submitted, mainly thanks to the implementation of the 1 See annex I. EPADES\DELE\D-CL\NT\628801EN 4 PE 378.960EN encomienda2, which laid the foundations for a colonial society: the soldiers were encouraged to take over large estates and enjoy the profits from them. On this basis, colonial society developed over the next three centuries according to a strict hierarchy. The majority of power was in the hands of a small white landowning elite; next came the craftsmen and the smaller landowners, and finally the working class, which included the mestizos and Indians, who worked for a minimal wage in mines and on farms. Following various catastrophes and wars in Europe, a large number of families emigrated to Chile, increasing the diversity of the population. From an economic point of view, Chile remained isolated throughout the 17th and 18th centuries, as the only trade authorised was that with the Iberian capital via Peru. Despite the ban on importing printed books other than those from Spain, the echoes of the European Enlightenment and the North American and French uprisings were heard in Chile and led to an initially covert rise of national consciousness, which soon became increasingly open. Napoleon’s incursion into the Iberian peninsula brought events to a head, and a group of Criollos refused to swear allegiance to Napoleon and declared independence on 18 September 1810. The elected junta abolished slavery and declared the complete freedom of international trade. In 1814, Peru’s viceroy sent troops to Chile to overcome the rebellion. Chile finally won its fight for independence after victories at Chacabuco (12 February 1817) and Maipú (5 April 1818). Over a century of political conflict between conservative and liberal political forces then followed. In 1938, an authoritarian regime came to power which promised economic stability, and Chile experienced nearly 30 years of prosperity, based on increasing integration into world trade. It was during this time that Valparaíso became one of the world’s most important ports. In 1951, strikes occurred in almost every sector of the economy. A popular reaction against the traditional parties resulted in the election of General Ibáñez the following year, supported by the Agricultural Working Party. In 1958, Jorge Alessandri Rodríguez, a former senator heading a conservative-liberal coalition, was elected to the presidency on a platform favouring free enterprise and foreign investment. The presidential election of 1964 was won by the former Senate member Eduardo Frei Montalva, candidate of the Christian Democrat Party. Frei carried out major reforms, such as partial government ownership of the copper industry and an agrarian reform which allowed for the expropriation of farms which covered over 80 ha, as well as farms which were badly run or which had been abandoned. His reforms aroused dissatisfaction in both leftist and conservative elements that resulted in violent political opposition. The conservative right considered his reformatory policies to be a travesty, whereas the left considered him too timid. As the presidential election of 1970 approached, leftist opposition united to form a Popular Unity coalition; it nominated Salvador Allende Gossens, who waged his campaign on a platform that promised full nationalisation of all basic industries, banks, and communications. He received nearly 37% of the votes against his rightist opponent, former President Alessandri. Allende became the first Marxist President democratically elected on a socialist programme. Thanks to his political instinct and historical pragmatism, he succeeded in presenting a ‘new way’ of embracing socialism at a time when the signs of crisis in the ‘real socialisms’ were already 2 The encomienda is the main basis of the Spanish colonial system. Each soldier received a section of land and the right to use the Indians who lived there to cultivate the land or mine gold. Dispossessed of their land and reduced to forced labour, the Indians were exploited and often died due to ill treatment. The encomenderos often neglected their duty of caring for the Indians and converting them to Christianity. The encomienda system is one of the reasons why Chile’s landowning structures remained remarkably stable over several centuries. The landowning oligarchy which ran the latifundia until the agricultural reforms of 1960 can be seen as a direct descendant of the encomenderos of the 16th century. EPADES\DELE\D-CL\NT\628801EN 5 PE 378.960EN beginning to show. Once installed as president, Allende quickly began to implement his camPaign promises, turning the country toward socialism and democracy. A large part of the economy was placed under state control, mineral resources, foreign banks, and large companies were nationalised, agrarian reform was accelerated and peasant councils were set up. In addition, Allende initiated a redistribution of income, raised wages, and put price controls in place. Opposition to his programme, however, was strong, and by 1972 the result was seen in protest movements. The situation grew still more critical in 1973, when runaway inflation, food shortages (caused by the reduction of foreign credits and the stockpiling of goods by retailers and small manufacturers), strikes, and political violence brought Chile to the brink of chaos.