Simon Johnson and James Robinson, both recipients of the 2024 Nobel Prize in Economics, have consistently expressed positive views on Chile’s achievements and the strength of its institutions, highlighting that it is the only Latin American country with real potential to achieve full development. In a recent statement, Robinson pointed out that Chile’s main challenge is to promote greater inclusion by eliminating favoritism, which acts as a barrier to progress. “There is an oligarchic mindset that needs to change, and Chile is at a critical moment because development models that don’t evolve, fail,” he remarked.

 

These words offer hope, but also confront us with a central issue that our political system has yet to address. Óscar Landerretche argues that “we are doing just enough to keep the country from falling apart, but we don’t really have an aggressive development strategy.”

 

In response to these analyses, the World Development Report 2024 (World Bank) provides insights on how to navigate the “ever-narrowing windows of opportunity” available to the 108 middle-income economies aiming to reach developed status. The report suggests fostering the entry of more flexible and competitive players, while removing outdated ones, through a combination of foreign investment, ‘technology infusion’ (and its domestic diffusion), and the adoption of successful business models. This would ignite a process of creative destruction (Schumpeter), which is essential for economic growth, where innovations and new entrants replace outdated products, technologies, and business models, reallocating resources more efficiently.

 

This challenge also involves overcoming internal structural barriers—such as elites seeking to maintain the status quo by protecting their market and social positions—and being willing to adapt policies and institutions to address shifting global challenges.

 

With R&D spending at only 0.39% of GDP (compared to 2.5% in developed countries), local companies need to be exposed to and benefit from international technology and knowledge transfers, as Chile did in salmon farming with Norwegian technology and in the transition to non-conventional renewable energy.

 

According to the World Bank, to prevent “middle-income countries from blindly drifting into increasingly turbulent waters,” it is recommended to improve efficiency in the use of capital, labor, and energy, and to refine measurement metrics, making public data that was previously confidential. The country will need greater economic freedom, more open and informed debates, and, crucially, the political courage to reform entrenched institutions, dismantle outdated agreements, and establish new long-term frameworks that will guide us toward progress.

 

Mónica Retamal F.

Kodea’s Executive Director