LATIN AMERICA SPECIAL — Free-market reforms open way for

Since the fall of the governments of the former east bloc and the rise of strong trade confederations such as the European Community, the nations of Latin America have been reforming their economies and turning from centrally planned systems toward free markets.

The International Development Bank (IDB) reports that Latin America has undergone a fundamental change in its attitude toward market forces and private ownership. The IDB is confident that Latin America will continue on its present course, and this will underpin future economic growth, thus lessening any nationalistic tendencies to return to the old ways of protectionism and statism.

According to The Brookings Institute, Latin American nations are in varying stages of reform, with the progress often determined by the extent to which they have played by orthodox economic rules in recent years as well as by the level of development at which they entered the process.

Some countries, most notably Chile, Mexico and Venezuela, have made radical changes in their economies. Most have come to realize that their future rests in the comparable

advantages they can offer world markets.

Chile was one of the top performing economies in Latin America in 1992 with a growth rate of 8%. Personal consumption increased a healthy 5.4%, real wages rose 4.9% and unemployment dropped to close to 5%, the lowest level in 20 years.

The growth rates in the leading sectors were: transport and

telecommunications, 11.9%; commerce and trade, 8.6%; fishing, 8.3%; and mining, 4.8%. It is the official policy of the Chilean government to (1) build a competitive market economy open to international trade and investment, and (2) ensure a climate of stability that provides guarantees for domestic and foreign investment.

Latin American nations, once closed to foreign investment, technology and management, have changed their public policies on mining from the promotion of state-run public enterprises to massive privatization and recruitment of foreign investment.

National legislatures have rewritten their mining codes and foreign ownership laws to encourage foreign investment.

Political leaders are willing to “go the extra mile” to attract foreign investment through programs involving widespread privatization and other free market steps. They recognize that nations must now compete for mining investment.

In sharp contrast to earlier years, the developing nations of the world have come to realize that foreign investment can bring new capital, technological expertise and management skills now lacking in their nations. Investment capital will be attracted to these areas where the cost of doing business, including the taxation rates, are commensurate with the perceived level of risk.

This strategy appears to be working. In most of the post-Second World War period, the U.S. and Canada attracted most mining investment because of rich mineral deposits, strong domestic demand for minerals, strong currencies, the availability of financial resources, predictable tax laws, an absence of political risk and a highly educated workforce.

In the past, the nations of Latin America typically attracted only 5% of investment spending. But new global attitudes are causing new investment in the region.

Metals Economics Group (MEC) of Halifax, N.S., estimates that of the 150-plus gold mining companies they surveyed worldwide, 33% were looking at opportunities in Latin America . . .

MEC (a research company) estimates that 40 international mining companies are operating in Chile alone. Silver production has risen 35% since 1987 and gold production has increased 40%. So many mining projects are under way that engineering firms have had to recruit outside the country because they have emptied the local mining schools. Chilean gold miners are said to be the highest paid workers in the nation.

— From “The Search for Gold: U.S. Producers Look Abroad,” a recent publication of The Gold Institute of Washington, D.C.