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ADES: Will quake shake Chile’s solid economy?
Question of the Day
As a longtime resident of Brazil, I had no experience with earthquakes. But on Saturday, waking up in the wee hours with a shaking house and then running out into the street only to see the road flop and wallow like a vulgar piece of carpet, cars thrown into the air like toys, power lines falling all around, and lampposts and power poles breaking like matches is appalling enough.
Yet the aftermath — the desolation of hundreds, if not thousands, who are homeless; the death count; the churches and hospitals either destroyed or overcrowded with people looking for help; the lack of water, food and medical attention — lasts a lot longer than the 3½ minutes of this magnitude-8.8 earthquake and the following tsunami.
An uglier facet of earthquakes, be it in Chile or elsewhere, is the looting of supermarkets and stores — first for water and food, especially for children; later for computers, refrigerators and plasma televisions. If the first reaction is understandable on a human scale, it is hard to accept the latter. The usual delays by government to react or, in the case of Chile, the size of the area affected by the earthquake, is hard to accept by those directly hit by the disaster.
One should note that Chile, probably the most civilized country in Latin America, is organized, law-abiding and, compared to its immediate neighbors, not corrupt. The police force, Carabineros de Chile, popularly referred to as “Pacos,” is an impeccable institution — corruption-free, serious about its duties and about how it administers the law. As a Brazilian appalled at the behavior of, say, the Rio de Janeiro police, I wonder sometimes whether it would not be a bad idea to import these wonderful “Pacos” back home and get us rid of 12-year-olds riding motorcycles and waving submachine guns in the streets of probably the most beautiful city in the world. It is no wonder that Brazilian tourism has not increased from 5.6 million visitors a year when Buenos Aires alone receives more visitors than that in 12 months.
What about what most economists consider one of South America’s strongest economies? I prefer the term “best-managed.” Think Chile, and copper comes to mind immediately. Of course, the first safety measure in a cataclysm such as this earthquake is to shut off energy, whether because of the evident accidents produced by the quake or as a safety measure. No energy, no industry — and of course copper mining and refining come to a stop. Mining operations of Codelco, the state-owned copper giant, at El Teniente and Andina stopped. The Anglo-American Los Bronces and El Soldado followed suit and together reduced copper production by a fifth.
The mining facilities reportedly were not affected directly by the earthquake. Production depends exclusively on the supply of energy, which slowly is coming back to normal. Copper futures reacted, of course, with a 5.6 percent increase on metal markets, but copper exports from the port of San Antonio are not directly threatened as the roads to the city are reported undamaged or with only minor problems. I believe the markets would react more aggressively should the immediate future of copper production be seen as somehow endangered.
Other Chilean exports — fruits, wine, fish products — are not seriously threatened. There are no reports of serious damage in production areas, and road damage, as serious as it may look now, is not so devastating as to affect the agricultural products that Chile exports to the world, including the United States, thanks to a serious effort by the Chileans to conform to product quality, impeccable packaging, good contract performance and, of course, the several free-trade agreements its holds with its business partners.
As electrical energy slowly returns to normal, victims are being attended to, roads and the few ports such as Talcahuano affected by the earthquake have not yet been dealt with, but firm commitment and the obvious national interests soon will handle the situation.
By far, though, the most positive factor in the recovery is the taking of office by President-elect Sebastian Pinera come March 11. A self-made billionaire who owns the airline Lan Chile, Visa (Chile), television and radio stations, hospitals and a soccer team, to name a few, the right-wing Mr. Pinero takes over the government after more than 20 years of a socialist coalition. Accused of being a “Pinochetista,” he lost the previous presidential election, only to win the presidency at the end of last year against incumbent Michelle Bachelet and the leftist “Concertacion.” Ms. Bachelet is leaving office with an approval rating of some 80 percent, almost as good as her counterpart in Brazil, Luiz Inacio Lula da Silva, who ranks first with 83 percent.
Mr. Pinera’s energetic Cabinet; his business approach to problems; his experience in building South America’s largest airline (surprising how Chile, with a population of 16 million, would hold first place in the South American airline rankings — where is Brazil’s Varig?); his attitude toward corporate governance, such as selling his stake in Lan Chile and Clinica Las Condes — these things illustrate my admiration of the Chilean righteousness. Whom else do we know in Latin America who has done the same, I wonder. Much to the contrary, I should add, the Kirchners of Argentina, for instance.
The new Chilean president in a few days will quickly repair, adjust, fix and redirect the Chilean economy to move it back on course and, in my opinion, better it in many ways. The most interesting segment of all is the mining industry. Mr. Pinera plans to bring private investment into Codelco, a move the current socialist government never even would have considered. Codelco is the symbol of Chile; it brings in 50 percent of total Chilean export cash. It has a problematic relationship, however, with miners unions, which will be brought up to a more interesting “raport de force” once Codelco’s shareholders include others besides the state.
Although the earthquake was one of the most severe in recorded history, its aftermath will not rock Chile’s economy. It will recover in days or weeks. The human aspects might not recover so fast, unfortunately.
Alberto Ades is a Brazilian businessman and real estate developer, sportsman and publisher.
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