Orations and responses
Response by Her Excellency President Michelle Bachelet
Ladies and Gentlemen,
First, I am most grateful for the honour conferred on me by the
University of Essex.
I receive this doctorate Honoris Causa as a recognition of my country and
the success we have had since the return to democracy in 1990.
I am also personally honoured to receive this distinction from a
university as prestigious as the University of Essex. Many Chilean
professionals have undertaken post-graduate studies here, and they return to
Chile to disseminate the fruits of that learning.
I am proud to share this Doctorate with personalities as diverse and
relevant as human rights activist Graca Machel, historian Simon Schama and
Nobel Peace Prize winner and ex-President of Costa Rica, Oscar Arias.
Both the University of Essex and, of course, Canning House, have strong
bonds with Latin America. The University’s Latin American Centre makes a
very relevant contribution to the integration and mutual understanding
between the United Kingdom and the countries of South and Central America.
At the same time it is particularly moving to recall the sentiments of
George Canning, a great friend and supporter of Latin American independence.
He knew that the New World could, as he put it, “redress the balance of the
Old”. In this respect, Canning foresaw the role that the region would play
in geopolitics. What he could not have predicted, however, would be the
degree of friendship, cooperation, and commercial exchange that would
Yes, we have very different realities. But these must not be, and has not
been, an obstacle to the continued good relations between, as Canning said,
the Old World and the New.
In this spirit, I would like to share some thoughts on our region of
Latin America, about the challenges imposed on us by the modern world, the
world of globalization, challenges that affect our economies.
The first great challenge involves something that Europe did and
continues to do very well: A policy directed towards great agreements and
not towards great dissensions.
The European experience has been in that sense very different to what we
have seen in our region. In a continent devastated by two world wars, the
countries of Europe reached fundamental agreements on key issues such as
citizenship, prosperity and social justice, putting these in the centre of
the public agenda.
It is important for us to look towards Europe and see what can be
achieved when there is the willingness to agree general consensus.
Our history, as a region and as a nation, has been very different. In the
same decades in which European nations were rebuilding their economies,
coming together economically, but also politically, when they were building
their welfare systems, we were consumed by ideological and political
confrontations that led to some of the worst years in our lives as
But I feel we have learnt the lesson. In the last decade, democracy has
become almost unchallenged as the predominant system of government.
Simultaneously, the macroeconomic fundamentals have consolidated in the
majority of our nations and the region is increasing its competitiveness,
new markets are opening and integration is advancing.
However, I insist: The willingness to build great agreements is the
central issue of the challenge facing the nations of the region.
The second challenge that I would like to put forward today refers to
something that has been essential since we recovered democracy, in 1990, but
one that my government especially has put as the central issue: to be
greater in social protection and social cohesion.
It is not possible to build solid economies or stable democracies when
large sectors of the population are excluded from progress. In other words,
democracy has to deliver.
The absence of policies that effectively promote social cohesion weakens
sentiments of solidarity, belonging and identity. When this occurs,
democracy is also weakened, given that disenchantment grows and
participation goes down. Weak democracies will have more difficulties facing
the current demanding agenda.
So we must demonstrate that democracy can provide sustainable growth,
reduce poverty and provide equal opportunities.
We have always said in Chile: we need to do both things. We need to
continue growing, but at the same time, we need to continue developing
social justice. We say also, “grow to include, include to grow”.
When a person speaks of growth, when we speak of development in Latin
America, it should go hand in hand with equity. Our economic agendas must
consider that dimension.
The third challenge is greater regional integration.
The reforms of the 1990s resulted in a significant liberalisation of
Latin America’s trade regimes. This led to exports becoming an important
source of growth.
The share of exports in GDP almost doubled in a decade from the mid 90s
to the mid 2000s, surpassing 20%. The region has learnt that in order to
grow it must remain integrated to global trade flows.
Trade liberalisation occurred on two fronts:
First, tariffs and restrictive import regimes were liberalised
unilaterally to integrate the economy to world trade.
Second, and as a complement of the above and not a substitute, regional
integration schemes were promoted with a large number of free trade
agreements and other arrangements being negotiated. The decade saw the
creation of MERCOSUR and the Andean Pact becoming the Andean Community.
Chile actively participated in this effort by negotiating free trade
agreements with almost all Latin American countries, a policy which allowed
us to keep our low and uniform import tariffs.
Intraregional exports have grown strongly in the face of the lowering of
trade barriers and free trade agreements.
However, intraregional trade in Latin America remains low by comparison
to other regions. The share of intraregional export in total exports
increased from 14% in 1990 to 17% in 2006. This contrasts with shares of
intraregional trade of 66% in the European Union, 45% in NAFTA and 28% among
the 10 ASEAN members.
This relatively low share is due to a number of reasons. The first is
Latin America’s continued specialisation in the export of commodities. These
generally have the rest of the world as their destination rather than the
regional market. This is not necessarily a bad thing, particularly given the
current high prices for these goods. However, it shows that there is little
integration of the region’s manufacturing chains. Greater intra-industry
trade within the region would lead to greater inter-dependence, less
volatile intraregional trade and strengthening of mutual economic links so
that growth in the larger economies would support growth in the smaller
The second reason is the relatively high costs of intra-regional trade in
Latin America. These derive from a lack of adequate infrastructure, poor
logistics and administrative costs. That is why, in a joint effort with the
governments of Bolivia and Brazil, my government has committed to having
operational by 2009 a bi-oceanic corridor of 3000 kilometres, from Santos in
Brazil to Iquique and Arica in Chile through Bolivia.
Resolving these issues by investing in infrastructure, improving the
logistics and eliminating unnecessary administrative steps for exports,
would also greatly increase Latin America’s competitiveness, attract direct
foreign investment and promote the diversification of exports globally.
Furthermore, greater integration would allow us to take better advantage
of the opportunity we see in Asia. We must build commercial alliances,
produce synergies among our countries and strengthen productive
complementation with Asia. We are actually talking with the countries
from the Pacific Basin, in order to work together in that subject.
The fourth challenge that we currently face is knowing how to take full
advantage of the high prices of our commodities in order to lay the
foundations for stable growth and a less volatile macro economy.
This is probably the greatest challenge that we face because it requires
a change of attitude. It requires more responsibility from those in power.
It makes us think of the future. When your wallet is full of money, it is
more important to think of the next generation than the next election, and
believe me, it is not always easy.
Latin America does not have a good track record in this sense. We have
wasted numerous opportunities in the past. My own nation did not know how to
take advantage of the saltpetre riches a century ago. A Chilean historian
described Chile as “a case of frustrated development”.
Populism has been a reality in our countries. The temptation is large.
From time to time, we experience these booms in commodity prices that fill
the coffers at the disposal of those in power, who have not always acted
with a due sense of history.
We all know the history: Money very badly spent, funds used to win
elections; uncontrolled inflation; corruption and generations of Latin
Americans condemned to poverty.
Today we are again experiencing a commodity boom. The price of the
principal Latin American exports has doubled or tripled in recent years. In
this, we see the record price of crude oil, copper, iron ore, wheat,
soybeans and others as a result of increasing demand particularly from
This time the boom finds us in a better position than before; inflation
is basically under control in almost all the region and the macro
fundamentals are also much better. Fortunately, there are many of us who
have learnt the lesson from the past.
What are we doing in Chile, where as you know, the price of copper
benefits us enormously?
We have made two bets:
First: we have decided that we are not going to spend. We are going to
invest. We are going to invest in our own productivity. We need to renovate
our productive structure and to do that we know that we need to do many
things that we have not done before.
I say invest and not spend because we are investing, principally in three
One, in education. If we want to seriously compete in the big leagues,
our human resources, our people, must be better prepared.
In 2008, we increased the education budget by over 900 million dollars. I
reiterate, this is only the increase we made this year. The subsidy per
child given to each school according to our system, doubles in the case of
students with learning disabilities and those from vulnerable social
Two, we are investing in innovation and technological transfer. The
entire R+D system is being redesigned as well as investment in innovation
projects throughout the country. We have created consortiums between
universities and productive sectors, which receive our support. We have
invested record sums in these projects.
Three, we have invested in infrastructure with a special focus on
competitiveness. As you know, thanks to a very innovative scheme of BOT, in
the 90’s Chile renovated a large number of our ports, airports and highways.
What is our current situation? We need to move the most isolated
producers closer to this infrastructure. We have made a thorough study of
our territory. We have designed macro productive zones and we have
identified a series of clusters to develop. We are building record numbers
of roads, uniting small productive centres with major highways, small and
medium-sized piers and tourist routes. This will all lead to a more
integrated pattern of development, not only for the large but also for the
small and medium sized producer.
The second bet that we have made is also important. Just as we have
decided to invest, we will also save.
Politically, it has not been easy. As in all countries that have not
reached development there are many unresolved needs. Proposing to save part
of the resources coming from the commodity boom is something that is not
That is why a great deal of political will is required; the will to
withstand spending pressures while creating regulatory institutions that
make this saving transparent.
We have two funds that operate abroad. We call them “responsibility
funds”. One of those funds is designed to finance future pensions.
This is how can we assure in the future, that if the price of copper goes
down – I hope not, but you never know – we will have the money to guarantee
The other one is to finance social spending. In this way, if the price of
copper reverses its trend over a long period, the nation knows that the
social benefits that we are granting today will not be eliminated tomorrow.
The funds have an additional advantage: The profits from the commodities are
saved abroad, keeping our currency at a competitive price and avoiding
I must insist that taking advantage of the current price of commodities
is one of the most important challenges we face today. It is a challenge
that demands that Latin Americans do not make the same mistake again.
In Chile, we have decided not to spend. We have decided to invest and
I have told you these are the challenges we have in Latin America, and we
are working together on that. For example, Unasur, which is the summit of
the presidents of South American countries. We are working on four main
areas: infrastructure, energy, social policies and education. We understand
we need all to develop, in order to have better life conditions in the whole
region. Latin America is doing pretty well, but we still have 205 millions
of people living in poverty, and these are terrible numbers.
We still have to work on: creating basic consensus, social cohesion,
integration and knowing how to take advantage of the commodities boom.
What do these four challenges tell us?
They tell us that it is up to us to do it.
For the first time in many years, Latin America has an opportunity to
move ahead and take the leap to development. We have recently seen that the
current international financial crisis has not hit us as hard as other
countries, even developed nations.
That is why I say, we can take advantage of this opportunity. Meeting the
challenges depends on us.
I would like to express my gratitude for the honorary doctorate given to
me and for this opportunity to share these thoughts with you.
On this visit to the United Kingdom and the Leaders’ Summit starting
tomorrow, we hope to strengthen ties with the governments that also face the
future with an inclusive perspective. Maybe the magnitude of the problems is
different, but I am sure that in United Kingdom there are also challenges
related to education, health, quality of life. We are all very aware of
climate change, also.
We will face every issue from an inclusive perspective, thinking that we
want a world with dignity, quality of life and where every person has the
life they deserve.
Thank you very much.
Her Excellency President Michelle Bachelet
3 April 2008