Chile’s Economic Recession and Its Social Implications

Economic indicators have taken a very negative turn at the end of the first quarter of this year. Along with unemployment reaching almost 9% of the labor force, the latest IMACEC reveals that the economy has expanded negatively by -2.1% compared to the same month in 2022, considering the same number of business days. Certainly this is clearly affected by mining production which, due to international prices, has experienced a significant drop in its level of activity. But trade has also contracted, experiencing a -5.4% drop, reflecting lower retail sales. Manufacturing production, for its part, fell by -2.5%, reflecting this in the lower capacity to provide jobs, as in the case of commerce. On the other hand, in the labor market, if the inactive who express a desire to work and constitute potential unemployment are considered, the unemployment rate would more than double, deepening a serious social situation that is also manifested in underemployment that shows the economy in many areas. Certainly, this situation of the economy could stabilize or improve during the remainder of the year, but it seems inevitable that the GDP will decrease by close to 2.0% in the year, maintaining the compromised situation represented by the level of unemployment in the country.

This serious situation from an economic point of view, which places Chile as the Latin American economy with the highest expected level of decline, represents serious problems from a social point of view. This encourages the claims of many sectors of the population who, with low incomes, must also overcome inflation that is still high. The implications that this has, and that it can lead to results with a greater negative impact in terms of prices, such as a new withdrawal from pension funds, are obviously serious for the country and its economy. This will deepen discontent and claims that will always find easy and superficial answers, especially in an electoral period like the one we are experiencing. The problem is that the search for “easy” solutions can deepen the problem that we are suffering as a country, and thus deepen the feeling of neglect that is widespread throughout Chile today. The latter is increased by the incidence of crime in its various manifestations, including the action of drug trafficking with its despicable consequences on social life and community development, added to the terrorism that exists in the southern zone. A very dangerous phenomenon is being provoked, consisting of a real dislocation of the society, constrained by structural problems of poverty and social segmentation, the incidence of crime and an economic problem that is growing and greatly affecting the population. We are in the presence of ingredients that constitute a “perfect storm” and that will lead to more chaos and protest on very obvious grounds.

All this also occurs in the context of a very weak government, which has less than half the support of those who disapprove of its administration. Certainly, very contradictory signals have been given regarding the need to stimulate investment and promote growth. In addition, it is an administration that has made many announcements, which do not acquire the form of reality but only long-term possibilities, as is usually contained in its very statement. At the same time, there has been little consistency in such announcements regarding the fight against crime and terrorism, an issue that keeps citizens who live their day to day in fear under severe threat. It is time to give clear and forceful signals to recover the lost economic rhythm, restore normality in citizen life and seek calls for national unity, overcoming those who contribute to divide in the face of the ungrateful panorama we are experiencing.

Prof. Luis A. Riveros

central University