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Poverty Reduction in ChileWith the highest GDP per capita in South America in 2020, Chile’s growth in the last few decades has been viewed as a model for Latin American development. Adopting a laissez-faire approach, the government shied away from significant spending on welfare, with the few existing programs geared toward middle and upper-class Chileans. However, recent administrations have made combating poverty a central theme of their campaigns, with presidents like Sebastián Piñera and Gabriel Boric both committing to the elimination of extreme poverty. Poverty reduction in Chile and the challenges the country faces serve as an inspiration and a warning for other developing nations.

Chile’s Approach to Poverty Reduction

Chile’s approach to poverty reduction is based upon a series of programs that focus on short-term income support and long-term economic security. During the 1990s, the Aylwin administration invested in hospitals and schools while also increasing the minimum wage. These reforms halved the number of Chileans living in poverty while contributing to the country’s steady growth throughout the decade. However, the highly centralized and inefficient public services system, coupled with strikes from teachers and health workers, meant Chile required a new solution for the new millennium.

Chile Solidario

With a new presidential administration and the need for change amid stagnating results, the government introduced ‘Chile Solidario’ as the country’s newest front in reducing poverty. Conceived in 2002, the program aimed to help low-income Chileans on an individual level while simplifying the arcane bureaucracy behind the country’s welfare system. Chile Solidario provided those in extreme poverty with cash stimuli and “psycho-social support” from social workers, assisting with immediate needs and future plans. In addition, the program synthesized many smaller financial assistance programs into a cohesive system, aiming to make aid more accessible to low-income citizens.

The program showed some successes with poverty reduction in Chile, albeit with limitations. The clearest evidence supporting Chile Solidario is the rapid decline of the percentage of people living in poverty in the years after the program’s introduction in 2002, from 29% to 8.6% by 2017.

Furthermore, attendance in schools and hospitals rose significantly, suggesting health and educational benefits in the future. A significant drawback of Chile Solidario is that while many in the program leave poverty, the rates of exit from the program are not as high. A study during Chile Solidario’s early years also found that household income per capita among recipients did not significantly increase.

The administration of Piñera further modified Chile Solidario. In 2012, President Piñera replaced Chile Solidario with the Ingreso Ético Familiar (Ethical Family Income). As part of his broader promise to end extreme poverty in Chile, IEF focuses primarily on conditional cash transfers to eligible Chileans, requiring school attendance and regular health checkups.

Looking Ahead

Unfortunately, the emergence of the COVID-19 pandemic and Chile’s strict lockdown has challenged the nearly continual progress of poverty reduction in Chile, with the poverty rate increasing from the 2017 low of 8.6% to 10.8% in 2020. Chile’s new president Boric promised $3.7 billion in aid in April 2022, undertaking to create new jobs while raising the minimum wage.

The ongoing debate over Chile’s draft constitution offers hope in the fight against poverty, promising to end job insecurity and institute a universal basic income. However, it also risks undermining the gradual, albeit successful progress of the last four decades in its radical rejection of the blueprint of the 1980 constitution.

Poverty reduction in Chile stands at a crossroads, able to embrace more direct government involvement in reducing the poverty rate or continue to let economic growth naturally spread to its poorest citizens. President Boric’s government seems to firmly favor the former, but in September, it is up to Chileans to decide whether they agree with his vision for the country.

– Samuel Bowles
Photo: Pixabay

Poverty Reduction in Chile
Like many other countries, Chile has struggled to ensure its citizens remain out of poverty. Luckily, the country has experienced economic growth over the past few years, now one of the fastest-growing economies in Latin America. This success can be seen by looking at how much of the population was impoverished in 2000 compared to 2017. In 2000, 30% of the population was impoverished. By 2017, the country was able to cut that number all the way down to 3.7%. As a result, Chile has grown its economy, helped those in poverty and reduced the poverty rate.

3 Things to Know About Poverty Reduction in Chile

  1. Free-Market: Much of the reason there has been poverty reduction in Chile is due in part to its decision to become a free-market economy in the mid-1980s. This resulted in increased trade with other countries. From 1985 to 1989, Chilean exports doubled. That trend has only continued for the country up into the modern day. By becoming a free-market economy, the country set itself up for a healthier economy.
  2. Chile Solidario: The Chilean government has implemented a multitude of programs to bring aid to those in poverty and bring about poverty reduction in Chile. The Chile Solidario was the first large-scale version of such programs. The program continued throughout the years 2002 and 2009. One of the ways the program met the needs of impoverished people in Chile was by actually sending case workers out to meet with Chilean citizens in poverty and rectify the problems they struggle with. By doing so, the program was able to personalize the aid given to a family depending on the unique problems that family was struggling with. While Chile Solidario did not help with employing Chilean citizens in poverty or improving housing conditions, it did help them use the welfare system within the country to get them through their economic troubles.
  3. Countercyclical policy: A countercyclical policy works opposite to the business cycle rather than along with it. The country instead lowers taxes and increases spending during a periods when the market is not favorable and raises taxes and reduces spending when the market is favorable. During the early 2000s, Chile adopted a countercyclical policy. As a result, public spending remains at the same rate throughout the year. The countercyclical policy has proven effective and reliable in Chile. For example, copper is the most important export to the Chilean economy. During 2009, however, the copper industry suffered quickly and as a result unemployment increased to 10%. The excess money that Chile saved up due to its countercyclical policy was used as a stimulus to help the people. Therefore, this policy can promote poverty reduction in Chile should there be an economic crisis in the future.

Due to the Chilean government’s actions, Chile has reduced poverty and provided a better standard of living for its people. Moving forward, it is essential that the country and other humanitarian organizations continue to focus on poverty reduction and improving livelihoods. If they do, poverty in Chile will hopefully continue to decrease.

– Jacob E. Lee 
Photo: Flickr