Chile's Aylwin Pushes Free Trade

President uses first state visit to US to seek pact and encourage foreign investment

By , Special to The Christian Science Monitor

CHILEAN President Patricio Aylwin Azocar is in the United States this week to press the Bush administration on dismantling trade barriers and to discuss new business possibilities with US investors and industrialists.

He will be the first Chilean chief executive in 30 years to make a state visit to the US, although he and President Bush have met previously in less formal circumstances. The US kept his predecessor, Gen. Augusto Pinochet Ugarte, at arm's length during the 17-year military dictatorship that ended in 1990.

President Aylwin's coalition government is still struggling to assert full civilian authority in the country amid a series of restraints left in place by General Pinochet, who remains commander-in-chief of the Army.

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Aylwin tells those business leaders who may be nostalgic for military rule that continued economic gains can be achieved only under democratic leaders.

"In the long run, democracy is better for business," says a Chilean Foreign Ministry official. "You see President Aylwin traveling to Europe, the [United] States, opening up opportunities, and you can't help but remember that Pinochet was a pariah who couldn't go anywhere."

Aylwin will urge Mr. Bush to move quickly on talks aimed at a US-Chile free trade agreement similar to that being negotiated between the US and Mexico.

Chile is a natural candidate for expansion of the free trade concept to South America. Its economy was radically revamped under the military regime, which reduced tariffs, privatized state industries, and welcomed foreign investment. Chilean exports now account for about 29 percent of the country's economy.

But observers note that presidential elections looming in the US may make a US-Chile pact difficult to achieve this year, considering the opposition from some of the sectors that would be directly effected.

One Chilean official gives the deal "no better than a 50-50 chance."

In Chile, there is little opposition to further trade liberalization since the industries likely to be damaged by competition have either risen to the challenge or disappeared long ago.

California's agricultural exports are similar to Chile's, and investors are taking a look at combining operations to provide year-round supplies, especially to Asian clients. Since the seasons are reversed, the two countries do not compete for markets.

Unlike most of its neighbors, Chile is overflowing with foreign investment. And a temporary surplus of hard currency has driven the peso too high, hurting exporters.

Chile now is seeking investments linked to technological innovations so that it can become less dependent on extraction of raw materials and move toward production of more value-added goods for export.

Chile's economic growth this year is expected to surpass 6 percent and unemployment is at its lowest rate in years.

Behind the rosy figures, however, Chile still faces some severe problems. Nearly a quarter of the nation's work force is still "informal," such as street vendors and seasonally employed fruit pickers.

And about 4.5 million of the country's 12 million people still live in poverty, estimates Ricardo French-Davis, an economist who just resigned as the Central Bank's director of research.

The talks between Aylwin and Bush also may include such topics as the world trade negotiations known as the Uruguay Round, drug trafficking, disarmament, and environmental protection.

Another likely topic is the political instability on a continent that had appeared to be safely in democratic hands. Coups and attempted coups in Haiti, Venezuela, and Peru, as well as much nervous whispering about Brazil, have stirred US officials to pay more attention to measures that might strengthen democracy in the region.

The dominant role of trade in Chile's economy is likely to keep the Army from entertaining any thought of a resumption of direct rule here. "A fraction of the sanctions imposed on Haiti or Peru after their coups would devastate this country," says one government analyst.

But despite Chile's relative prosperity, the political role of the armed forces is still a question mark. The top commanders, whom Aylwin cannot replace under the current Constitution, continue to fight for a strong role in internal security and intelligence matters, backed by their allies in the National Congress and the news media.

While in the US, Aylwin will also visit Los Angeles, San Diego, Chicago, and Dallas to discuss trade and investment.

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