Chile Takes Major Steps Against Poverty

By , Washington-based Council on Hemispheric Affairs.

ONE of Chilean President Patricio Aylwin Azocar's primary objectives upon taking office in 1990 was to do something about the 5.2 million citizens, 40 percent of the total population, who fell below the poverty line of $200 monthly for a family of four. Recently, United Nations officials have called his antipoverty strategy one of the world's best.

Chile's social programs were designed to attack the structure of poverty by increasing government expenditures on affordable housing, health care, and education for the poor, as well as instituting programs to give small entrepreneurs the necessary skills and financial resources to increase their productivity and, subsequently, their earnings. The Chilean government has attempted to increase the percentage of its population capable of higher earnings because of newly learned skills.

Santiago, the country's capital, defied conventional wisdom in 1990 by imposing a tax increase of $700 million - 2 percent of the country's gross domestic product, which was huge by Chilean standards - to fund its new antipoverty programs. Some economists predicted these actions would fuel recession, increase unemployment, and promote inflation. To the contrary, unemployment has plummeted from 25 percent to 4.4 percent, and inflation decreased from 26 percent to 12.7 percent since Mr. Aylwin took office in 1990. The country lurched ahead by 10 percent last year.

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To help eliminate one of the main causes of poverty - students dropping out of high school in order to become breadwinners for their families - the government introduced a scholarship fund to pay for books, transportation, and meals, and to provide incentives for academic excellence. As a result, the number of students failing to complete their high school education has decreased by 33 percent.

Chilean authorities have successfully put free-trade economics to work to promote economic growth and assist the poor by hooking up many of the 800,000-plus small businesses in the informal sector - which together employ upward of 80 percent of the nation's poor - with goverment-subsidized financial resources provided by the private sector.

Under this program, private bodies, nongovernmental agencies, and consultants study the needs of these small enterprises and prepare financial plans that small business owners then can take to a bank to obtain the necessary capital to increase their productivity.

This program has provided far greater access to credit for modernizing businesses, increasing profitability, employment, and wages.

The drive by Chilean women against poverty and male machismo has been aided through the establishment in 1991 of the National Women's Service (SERNAM). With the express purpose of improving the economic situation of the female heads of households among the rural poor, SERNAM has set up information booths throughout the nation to provide professional advice on family, legal, and human rights, as well as labor matters, at no cost.

SERNAM also has helped augment economic opportunities for women by increasing their marketable skills.

With the likely election of Sen. Eduardo Frei Ruiz-Tagle in December, the fight against poverty should continue with much the same thrust as was the case under Aylwin.

Other third-world nations might well look to Chile's war on poverty as a useful example of how to help the poor without needlessly harming the economy with gratuitous regulations and running up huge government deficits.

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