The Minister of Foreign Affairs, Heraldo Muñoz, explained how Chile aspires to deepen Chile’s opening to the world and improve regional integration; how ideas, automatization and digital capital are going to be absolutely fundamental in terms of prosper; and how Chile would like to deepen their relations with the US, at the state level, not only at the federal level.
Chile has been internationally praised as the pioneer of the macroeconomic reforms in Latin America. The country is currently facing structural socio-economic reforms to ensure stability and long-term development. What are the main challenges Chile is currently facing?
The macroeconomic reforms were part of the success story of Chile. The public policies that we started implementing from 1990 allowed us to significantly reduce poverty (from 39% in 1990 to 13% today) and achieve an extraordinary social inclusion over the past 25 years. Today, 7 out of 10 university students come from families that have for the first time someone attending college. But macroeconomic reform is no longer a novelty as many countries follow that same path today.
Currently, our challenge is how to go beyond what we have achieved in the past. We must encourage social cohesion to ensure that our past accomplishments are long lasting. That is why President Bachelet decided to tackle our biggest challenge – inequality. Chile aspires to become a leader in the second generation of reforms, which are complex socio-economic structural reforms. Today people demand a more active role of the state and we have to make sure that prosperity enters the homes of all Chileans. That is precisely why Congress approved tax reform proposed by the government and we want to implement educational reform, and improve the pension and healthcare systems. At the same time, we face the challenge of sustaining our economic growth through this second generation of reforms and in the midst of a global economic downturn. We have to boost our productivity, improve access to cost-effective and clean energy, and tackle several other bottlenecks at the same time.
What are your priorities in terms of economic diplomacy?
One of our main tasks is to deepen Chile’s opening to the world. We have 23 commercial agreements with 64 countries and we need to improve the quality of these agreements to ensure that our products reach the right markets. But Chile doesn’t want to remain just an exporter of commodities. We want to add value to our products and advance towards a knowledge-based society. Therefore, we need better quality education, access to science and technology, investment in productivity and innovation, and cooperation with markets that are leaders in these areas. That is why the relationship with the United States, the European Union and China is extremely important for us.
Another priority is to deepen our presence in Latin America and the Caribbean and improve regional integration. There is diversity in Latin America and countries have different development models, but that cannot be an obstacle to regional integration and cooperation. We need to foster dialogue between the two main economic blocks, the Pacific Alliance and MERCOSUR. Chile has economic interests in both the Pacific and the Atlantic, and therefore we cannot have exclusive regional perspectives. Thus, a guiding concept for us is “convergence in diversity.”
At the same time, we continue to engage with other countries with which we don’t have free trade agreements (FTA) yet. For example, Asia is fundamental for our future, so we are currently negotiating a FTA with Indonesia. We are also interested in improving the quality of our presence in Russia and other markets, be it in trade or in investment.
You are also the President of the Foundation Imagen de Chile (FICH). How important is country branding in today’s globalized world?
In today’s globalized and competitive world, countries need to have their brand recognized to underline their specific identity. It is necessary to create the image of a country that is worth investing in or trading with to ensure access to the right markets and investments. Therefore, countries are increasingly investing in their image and it has proven to be worth doing.
The studies that we have conducted at FICH indicate that Chile doesn’t have a specific image separate from Latin America; we are perceived as part of the region. So we need to improve our own image and the image of the entire region. We must have an approach that distinguishes us, but does not take us out of what we are, and that is Latin Americans. So, in that sense there is a lot of work to be done.
But at the same time we have many competitive advantages. For example in terms of tourism, if you look at South America, the historic and environmental tourist attractions are so magnificent that we can easily promote integrated tourism circuits. Even though people from outside the region may not have a specific image of Chile, those that have had contact with Chile either personally or through business or even consuming our products, tend to have a more precise image and think of Chile as a serious country with rule of law and international prestige. So the work of the Foundation is important in projecting Chile internationally in order to complement what business people are doing and what we are doing from the governmental perspective.
Nevertheless, promoting the image of a country is not only the responsibility of the government. We need to engage all actors, i.e. the private and public sector, and civil society to brand Chile internationally and generate interest in our country. Let me give you a good example: the Chilean wine industry realized that we could not keep promoting just a few wine brands separately. So Wines of Chile was established, an organization in charge of promoting the entire Chilean wine industry, and it has given excellent results both for the industry and for the image of the country. So that is the type of approach we need when it comes to promoting our country and we still have a long way to go.
You accompanied President Bachelet in her two official trips to the US. What were your main impressions from those trips?
The relationship between Chile and the US is a mature, high-quality strategic relation, which has evolved over time. There is a high degree of mutual appreciation and coincidence on bilateral and multilateral issues. Even though today our first trade partner is China, the composition of trade with the US is more important to us because we export value added products to the US. In fact, copper is less than 50% of our exports to the US, while in the case of China is a much higher proportion of the exports. The FTA has proven to be very successful for the expansion of bilateral trade. Furthermore, the US continues to be the first foreign investor in Chile.
We were very pleased when President Obama invited President Bachelet for an official visit to the White House only 90 days into her administration; that was a very strong signal. Initially, the meeting was going to last only half an hour, but it ended up being an hour and twenty minutes, because it was so engaging and there was a great deal of affinity. After that meeting, during an interview about international politics where the global situation seemed a bit bleak, President Obama suddenly said: No, I don’t want to be pessimistic. There are good news in the world: for instance Chile! I think what he was saying is: here is stable country that has managed well its economy and is tackling huge social challenges like education, health, etc. So I think we are being appreciated in the US.
The maturity of our relationship is also reflected in the fact that the US gave Chile the visa waiver, making us the first Latin American country to receive access to that special club of countries whose tourists can enter the US without a visa, using quick digital means and with practically no cost. I think that is also recognition of the stability of Chile and the seriousness of our institutions.
What are your priorities in terms of the relations with the US? In which areas would you like to see increased cooperation?
We would like to deepen our relations at the state level, not only at the federal level. For example, we have strong relations with California and Florida, and we want to do the same with Massachusetts, Washington and other states that could benefit us in terms of access to science and technology, innovation, digital industry, higher education, etc.
Secondly, we want to boost further trade and investment with the US, as our number one foreign investor. Thirdly, we would like to help tackling some of the pending issues between the US and Latin America. The opening of US relations with Cuba has received warm support in Latin America. Chile disagrees with the embargo and sanctions the US has imposed on Cuba, and we believe it is about time we leave the cold war behind us. Another interesting issue is what President Obama has signaled regarding immigration reform.
Chile is a non-permanent member of the UN Security Council and in January you will take over the presidency. What are the main issues you would like to tackle during that period?
There are certain issues on the agenda that are already fixed independently of what the presidency might want to stress, such as reports on the peacekeeping missions in Africa, the Middle East conflict and so on. But countries that preside the Security Council generally choose a specific issue they want to treat in an open session and usually it is presented by the Head of State. In fact, President Obama presided the Council on behalf of the US in September 2014.
We would like to focus on a theme that would combine inclusive development with security and peace. The nature of non-inclusive development is quite varied (socio-economic, territorial, ethnic, religious, tribal, etc.) and it is non-inclusive societies that tend to foster conflict. We also want to reflect on how to build peace after conflicts end. In other words, after a peace keeping operation has secured a minimum degree of peace, how to build on that by promoting inclusiveness.
What message would you like to convey to the international community about Chile today?
I would say: trust Chile. Chile is a serious country that welcomes foreign investment and has clear rules of the game. We have minimum levels of corruption and we will ensure that those who engage with Chile reap benefits. We have achieved a great deal and we are proud of that. But we are also conscious of our pending tasks and the main one is inequality. According to the Gini coefficient (income inequality indicator), Chile is among the 20 most unequal countries in the world. That is not a problem specific to Chile, but to all Latin America. In fact, Uruguay, which is the most egalitarian country in the region, is more unequal than the most unequal country in Europe.
But it is not only about income inequality. It is also about gender inequality, because women in Chile still earn 20% less than men for the same functions. It is about territorial inequality, because people in the regions don’t have access to the same public services as people in the capital. It is about ethnic inequality, because minorities still don’t have the same recognition and access to benefits than the rest of the population. So our challenge is inequality in a broader sense. We want economic growth to be sustained by social cohesion and for that to happen we need to reform our educational system.
Today in Chile, we have public schools, subsidized schools (that also charge the families of the students), and private schools. When I was young, my parents could not have afforded a subsidized school, so I went to public schools. But back then, public education system was very good; so if I became foreign minister it is thanks to public education. Today we need to reconstruct our public education system and ensure it has even better quality so that we can confront the challenges of the world economy.
In the future, the cost of labor and even capital aren’t going to be relevant, what will matter will be ideas. And if you don’t have the capacity to create, you are not going to prosper. It is increasingly clear that automization and digital capital are going to be absolutely fundamental. There will be a Pareto curve situation where smaller groups of people are going to reap disproportionately large benefits because of ideas. This is the world we are living in, and if Chile doesn’t invest strongly in better education, in innovation, we are going to be left on the side of the road. Smaller countries can do it, too; look at Singapore, Finland and other countries.
So my message to the US is: trust us, we are passing through an economic slowdown together with the world economy, but we are going to come out even stronger because we will have accomplished the structural tasks that have been pending for so long.