Country Analysis Chile

Topics: Inflation, Gross domestic product, Economics Pages: 8 (2485 words) Published: February 13, 2014


Country analysis

Amsterdam, 04-11-2013

GROUP 13

Contents

GDP
The Gross Domestic Product is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, usually a year. It includes all private and public consumption, government spending, investments and exports minus imports that occur within a country. GDP is used as a measurement of economic growth and shows a country’s economic situation.

The GDP of Chile is reported by the World Bank and, though it fluctuates around the trend, shows a relatively stable growth. The GDP was last recorded at $9447,07 in 2012. From 1987 until 2013 the annual growth rate of Chile averaged 5.5%. The global economic slump had a relatively small effect on the country which resulted in negative economic growth in 2009. After a relatively low growth at the start of 2010 growth has increased to above-average levels, even reaching 9.9% in 2011. Currently growth is below-average with a forecast of 4.4% in 20141. Chile is one of Latin America’s fastest growing economies and has one of the highest GDP per capita, which equals 76% of the world’s average, in the region.

When GDP per capita is adjusted by purchasing power parity (PPP) a constant growth can be seen as above indicating increased economic prosperity on a year-by-year basis, with only a small dip at a time of global economic troubles. Adjusting GDP per capita by PPP is useful to compare differences in living standards between nations as PPP takes the relative cost of living and inflation rate of countries into account, and not just exchange rates that may distort the real differences in income.2

Population Growth
Chile has made a big progress over the last decade in terms of population growth. Since the 1960s, the country has seen a track record of robust growth and poverty reduction. From 1960 until 2012, Chile Population averaged 12.6 Million reaching an all time high of the total population of 17.4 Million in December of 2012. 3

A key feature of the modern world is the “emerging middle class”. This group has obvious interest for sellers of consumer products, such as foods, drinks, medicines, and household appliances. This group can also be identified as relevant target groups for premium brands, such as Coca Cola, due to their income and interest in prestigious consumption. According to the 2012 Latin American Economic Outlook report released by the Organization for Economic Cooperation and Development (OECD), Chile has the third highest percentage of middle-class citizens in Latin America.4 The number of people belonging to this middle social class has been slowly growing in Chile, from 46.6% in 1998 to 49% today. Most middle-class citizens work in the transport and construction sector, followed by agriculture. The group that has been defined as wealthy has also been growing slowly, from 32% and 33%, while the poor in Chile have declined from 20.1% in 1996 to 18.7% in 2006.5

Wage Rate
GNI per capita (formerly GNP per capita) is the gross national income, converted to U.S. dollars using the World Bank Atlas method, divided by the midyear population. GNI is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad.6 The GNI is important to the Andina Corporation as it gives information on social economic growth and gives information on the competitiveness of the local market within the global economy.

When analyzing the wage rate over the past 10 years we can clearly distinguish a huge growth of income over the years with a GNI per Chilean capita of 4.570 USD (=3384 EUR) in 2003 and 14.280 USD (=10.575 EUR) per year ten years later. This makes for a GNI per capita increase of over 312% in ten years’ time. A slight shrinkage is noticeable in 2009...
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