Business

Business

Chile's business community has long played an active role in the nation's politics. During the years of import-substitution industrialization, businesses developed close links with political leaders and state agencies, seeking subsidies, tariffs, and other forms of regulation that would protect them from the rigors of market competition domestically and internationally. Indeed, the expansion of the state, in particular its decentralized semiautonomous agencies, led to the creation of semicorporatist boards whose members included formal representatives of large business associations. As the parties of the right began to decline in importance, business leaders became increasingly "apolitical," preferring "independent" candidates such as Jorge Alessandri to those with strong party ties.

In the early 1990s, most businesses in Chile employed only a handful of workers, and business trade groups probably represented less than 20 percent of all business establishments in the country. Small businesses were represented by the Council of Small and Medium Enterprises (Consejo de la Pequeña y Mediana Industria-- CPMI), and large businesses were represented by the Chamber of Production and Commerce (Cámara de la Producción y Comercio--CPC). Small and medium-sized business groups were in turn divided into associations, such as the Truck Owners Association (Asociación Gremial de Dueños de Camiones) and the Federation of Retail Business of Chile (Confederación del Comercio Detallista de Chile). The most important of the associations affiliated with the CPC were the Industrial Development Association (Sociedad de Fomento Fabril- -Sofofa) and the National Agricultural Association (Sociedad Nacional de Agricultura--SNA), both of which had considerable political influence and clout.

During the Allende years, the associations of both small and large businesses played a critical role in combating the parties of the left and undermining the Allende government. Smallbusiness associations, particularly the truck owners, brought the country to a standstill, aggravating an already difficult economic and political situation. Large-business associations also worked hard to depose the Popular Unity government. Sofofa, in particular, played an important role by supporting a highly cohesive group of economists critical of the Allende government who prepared a document that served as the basis for the military regime's shift in economic policy. Because of their prominent role in bringing down the Allende government, business leaders assumed that they would have influence over economic policy and be able to reestablish a close and mutually beneficial relationship with the state. Much to the business leaders' surprise, the far-reaching structural adjustment policies pursued by the military government proved extraordinarily disruptive, contributing to the bankruptcy of hundreds of major firms.

Business leaders, already weakened by the reform and revolutionary policies of the previous two civilian presidents, were too dispirited to oppose the determined economic advisers of the military. Small business, which had the most to lose, made some gestures toward joining the growing opposition movement after the dramatic economic downturn of 1981, only to be kept in line by the regime's strategy of using tough measures when necessary and moderating its policies at key points just enough to retain private-sector allegiance.

Overall, the lack of strenuous resistance to the regime, particularly from medium-sized and large businesses, was attributed to memories of the traumatic Allende years. Entrepreneurs and business managers feared that any strong opposition on their part might weaken the military regime and create the possibility of a return to the leftist policies that they felt had practically destroyed the private sector in the past. A weak business community, in combination with the private sector's determination not to risk a return of the left, gave the military regime wide latitude to restructure the economy as it saw fit.

Because of the weakness of the parties of the right, business groups remained influential in right-wing politics after the return to democracy. In 1989 they were instrumental in imposing an "independent" candidate of the right to run for president and actively supported one of their own in the presidential race of 1993. Yet business associations were less influential in politics in the early 1990s than previously, largely because of the changes resulting from Chile's opening to world markets and, ironically, because of the decreased importance of the state in regulating and controlling business. Political leaders and government officials, however, solicited the views of business interests on labor and environmental questions because of their common desire to encourage continued expansion of the Chilean economy.

http://www.doingbusiness.org/data/exploreeconomies/chile
http://www.tradingeconomics.com/chile/business-confidence


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