Summer Solstice at Salar de Atacama

December 31, 2013

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Early […] December 21, 2013, we were sitting in the San Pedro de Atacama square, celebrating the solstice south of the equator. Overnight the temperature had fallen to 40 degrees Fahrenheit, but during the day it rose steadily again to about 70 degrees Fahrenheit. Under cerulean blue skies, we were surrounded by small birds chirping, tourist shops, hotels, hikers and trekkers, cyclists, horseback riders and desert watchers on one side and a small village church on the other.

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This is my 15th trip to Chile and my first to the northernmost region. Here, the Bolivian border is only 45 kilometers away. Peru is not much farther. […]

I recall a meeting years ago at the central bank of Chile with then-governor Vittorio Corbo Lioi. Vittorio was describing what it was like in his youth in the northern provinces. He was the son of a poor but hard-working family. In those days, when Chile was run by dictators, there were no universities with branches in the north. But as he was getting ready to go to college, Chile transitioned to a capitalistic system that included a voucher system for education. […] Thus he was able to go on to study economics at the University of Chile. Students from his region used to face a 1,000-kilometer commute to any college, but today there are branches of universities in all 12 provinces of the country. And here I am now, on the campus of a Catholic university in the territory of northern Chile, thinking of Vittorio and his history and observing the continuing evolution of this fascinating country. I have fond memories in many ways.

It is interesting to be in Chile and to think about the fact that only a few decades ago the country was once again under the heel of an oppressive dictator. In 1973 the Popular Unity (Socialist) regime of Salvador Allende was unseated by a coup, and Augusto Pinochet came to power. His oppressive rule lasted until 1989, when democratic elections took place and a revitalized, vibrant Chile began to emerge. The country successfully experimented with a mix of democratic and socialistic political forces and entrepreneurial, free-market capitalism.

Today in Chile, a woman (Michelle Bachelet) has been re-elected president with a huge majority and strong political power base. Across the border in Argentina, another woman (Cristina Fernandez de Kirchner) is president and is following a completely different approach to operating her government. In Chile, an independent central bank manages financial affairs. A high-tech operation puts fast internet connections in every village. The flourishing economy has a nearly fully funded retirement system with no long-term social-security issues, and it operates in a growth-oriented way while still extending protective benefits to its population. Across the border in Argentina, by contrast, that country is headed for its sixth default in a century. Inflation is rising; government programs are failing; and regional strife and corruption create conflict with the political power center in Buenos Aires. What a contrast between the western and eastern sides of the Andes!

A woman has also been president of Brazil since 2011, but how Dilma Rousseff will ultimately direct her country’s evolution in economic and political terms still remains to be seen.

The contrasts in South America and the political and economic evolution that has occurred in the space of just a few decades suggest that the continent can continue to expand in positive ways if permitted and encouraged. The question is whether, in today’s rapidly shifting global economic landscape, these natural-resource dominated economies will flourish. Will investments in their stock markets bear fruit? And will US policy remember and acknowledge that powerful influences on the US come through the immigration, legal or otherwise, of Spanish-speaking peoples from south of our border?

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The preceding is an abridged commentary by David Kotok of Cumberland Advisors and has been reposted with permission of the author. The commentary is available in its entirety at http://www.cumber.com/commentary.aspx?file=122313.asp

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