Chile & Peru: Conquistadores, Copper & New Colonialism

April 25, 2016

J.D. Crouch

Introduction

“Our story begins with two ships. On one, landing in northern Ecuador in 1532, were fewer than 200 Spaniards accompanying the man who already claimed the title “Governor of Peru.” Their ambition was to conquer the Inca Empire for the King of Spain and to secure a large share of its reputed wealth of precious metals for themselves. The other ship, the Carolina, reached the New World 138 years later, in 1670, at an island off the coast of what is today South Carolina. Among those on board were servants whose modest ambition was to find a better life than the grinding poverty they had left behind in England.

The two ships symbolized this tale of two Americas. On one, conquistadors; on the other indentured servants…” – Niall Ferguson, Civilization: The Six Killer Apps of Western Power, 2011

All that glitters is…copper

• Development gaps between Peru & Chile manifest themselves economically via GDP & Population and socio-politically via Corruption Index & Poverty Rate

• Likely that copper and gold prices matter more to FDI than political developments – or anything else

• Until they are not, Peru and Chile are safe havens for US FDI for a few natural resources but mostly copper

Chile Peru

Population 17,508,260 30,444,999

GNI Per Capita $ 14,900 $ 6,410

GDP (million) $ 258,100 $ 202,600

Top 5 Exports (2014) Copper cathodes, copper ores, copper unrefined,

wine, fresh grapes

Copper Ore, Gold, Petroleum, Copper cathodes, Flours

2013 Poverty headcount ratio at $1.90 a day (% of population) 0.9% 3.7%

# of Presidents since Independence

37 94

Coups since 1900 10 3

# of Presidents since 1990 4 6

Transparency International -Corruption Index Rating (0 = worst,

100 = best) 70 36

World Bank Doing Business Indicators: 2015

• Ease of Doing Business Rank indicator is the “overall” score

o Range: 1 = Best; 189 = Worst

o Peru = 50; Chile = 48

o USA = 7

• = Indicator of interest for multi-nationals

50

97

48

64

35

15

49 50

88

6974

48

62

24

5156

79

36 33

6356 58

Peru Chile

Freedom House – Overall Ratings: 1999 & 2015

4.5

2.0

2.5

1.0

4.0

2.0

3.0

1.0

5.0

2.0 2.0

1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Peru 1999 Chile 1999 Peru 2015 Chile 2015

1 =

Mo

st F

ree

, 7 =

Le

ast

Fre

e

Overall Freedom Rating Civil Liberties Political Rights

Freedom House –Details & Aggregate Score: 2015

• Categories:

o Free, Partly Free, Not Free

• Score based on aggregate of indicators:

o 0 = Worst, 100 = Best

• Aggregate Score:

o Peru: Free, 71

o Chile: Free, 95

o US: Free, 90

10

13

7

15

8 8

10

12

15

12

16

11

14

15

Electoral Process(12)

PoliticalPluralism &

Participation(16)

FunctioningGovernment

(12)

Freedom ofExpression &

Belief (16)

Associational &Organizational

Rights (12)

Rule of Law (16) PersonalAutonomy &

Individual Rights(16)

Peru Chile

Chile: FDI & Commodity Prices 1990 – 2013

FDI & Copper Prices FDI & Gold Prices

R² = 0.6417

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

- 5,000 10,000 15,000 20,000 25,000 30,000

Co

op

er

-M

T/$

FDI (millions)

R² = 0.7883

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

- 5,000 10,000 15,000 20,000 25,000 30,000

Go

ld -

per

tro

y o

un

ce/S

FDI (millions)

Peru: FDI & Commodity Prices 1990 – 2013

FDI & Copper Prices FDI & Gold Prices

R² = 0.8281

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

(2,000) - 2,000 4,000 6,000 8,000 10,000 12,000 14,000

Go

ld -

pe

r tr

oy

ou

nce

/$

FDI (millions)

R² = 0.6512

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

(2,000) - 2,000 4,000 6,000 8,000 10,000 12,000 14,000

Co

op

er

-M

T/$

Titl

e

FDI (millions)

FDI & Presidential Elections

Peru Chile

(2,000)

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

FDI -

mill

ion

s

FDI into Peru Peru Pres Election

-

5,000

10,000

15,000

20,000

25,000

30,000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

FDI -

mill

ion

s

FDI into Chile (millions) Chile Pres Election

One off investments in service sector

Post Colonial Results: 2015

• 10 South American Spanish Colonies

o Population = 392,583,192

o GDP = $6.4 billion

• 10 US English Colonies

o Population = 90,990,181

o GDP = $5.4 billion

approx. year of colonization

approx. year of indepedence 2015 population 2015 GDP

10

So

uth

Am

eric

anSp

anis

h C

olo

nie

s

Brazil 1500 1850 204,259,812 $ 3,166,000.0

Colombia 1525 1811 46,736,728 $ 665,000.0

Argentina 1536 1853 43,431,886 $ 964,300.0

Peru 1529 1824 30,444,999 $ 385,400.0

Venezuela 1522 1830 29,275,460 $ 491,600.0

Chile 1541 1818 17,508,260 $ 424,000.0

Ecuador 1563 1820 15,868,396 $ 98,300.0

Bolivia 1524 1825 10,800,882 $ 73,800.0

Paraguay 1537 1811 6,783,272 $ 60,150.0

Uruguay 1516 1825 3,341,893 $ 72,360.0

10

US

Engl

ish

Co

lon

ies

Connecticut 1636 1776 3,596,677 $ 259,661.0

Georgia 1732 1776 10,097,343 $ 496,180.0

Maryland 1633 1776 5,976,407 $ 360,969.0

Massachusetts 1630 1776 6,745,408 $ 473,606.0

New Jersey 1664 1776 8,938,175 $ 573,947.0

New York 1626 1776 19,746,227 $ 1,444,406.0

North Carolina 1653 1776 9,943,964 $ 503,745.0

Pennsylvania 1682 1776 12,787,209 $ 677,582.0

South Carolina 1663 1776 4,832,482 $ 196,887.0

Virginia 1607 1776 8,326,289 $ 476,919.0

Conclusion

"The past is never dead. It's not even past.” – William Faulkner