DAA 2014

Taking Chile to New Heights

As Chile's minister of foreign affairs, Alfredo Moreno, '82, has shaped his nation's foreign and trade policy, driving economic growth

By Rebecca Rolfes
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When Alfredo Moreno, '82, took over as minister of foreign affairs for the Republic of Chile in 2010, he knew there was a big opportunity to increase investment from China, whose economy was hurtling along with double-digit growth. Chinese investment in Chile at the time was small - less than $100 million, while Chile's investment in China was seven times larger.

The two nations had signed a free-trade agreement five years earlier, but the pact didn't cover services such as engineering and architecture. A supplementary investment agreement with China in 2012, which Moreno spearheaded, gave the Chinese the same legal protections as native Chileans and paved the way for a $1 billion investment in the first year and more to follow.

"The Chinese began to invest and now those investments are growing very fast," Moreno said in an interview earlier this year in his Santiago office as he prepared to step down following four years as foreign minister under the administration of center-right billionaire businessman Sebastián Piñera. Chilean law bars the president from seeking consecutive four-year terms, and Piñera was succeeded in March by Socialist Michelle Bachelet, Chile's president from 2006 to 2010.

Moreno is confident that sound economic policies and the continued opening of trade will keep Chile's economy on course. "This is a country that was the poorest Spanish colony and today is the country that has the highest income per capita in Latin America," he said. Chile enjoyed annual GDP growth of nearly 6 percent between 2010 and 2012, according to the World Bank, although the economy slowed to the 4 percent range last year. Moreno hopes that a rising standard of living will make his country the most developed in Latin America. "Chile at one time was a closed economy, but it has been completely transformed," he said.

ALWAYS THE BOSS

Moreno was raised in Santiago and earned his undergraduate degree in engineering from the Pontifical Catholic University of Chile. He took courses in the economics department, which has had strong ties to the University of Chicago, dating to the era of "the Chicago Boys." They were the University of Chicago - educated Chilean economists who advocated for deregulation and free markets and were named to key government positions during the regime of Augusto Pinochet.

Moreno was offered a scholarship to study at a US university and chose Booth, where he enrolled in the Full-Time MBA Program. When he returned to Santiago, he taught finance and accounting at the Pontifical Catholic University.

Moreno credits Booth with teaching a way of thinking that he has applied in a range of top positions he's held in the private sector and in government. "If you understand why things are happening, you are better equipped to solve problems," he said. "Otherwise, you are looking only at the effects of a problem, not its causes."

During the early 1980s, while Moreno was a teacher, Chile was suffering perhaps the worst financial crisis in its history. Banks and private companies were going bankrupt and gross national product was falling. Unemployment stood at 30 percent. It was part of Latin America's década perdida (the lost decade), a period when governments were unable to pay their foreign debt obligations - destabilizing local currencies and throwing economies into shock and recession.

This is the point at which Moreno's career took a sharp turn. With, he admits, little work experience, and at only 28, he was asked to manage the largest radio broadcaster and magazine publisher. He went on to manage, at the same time, the largest private Chilean airline. After that, he headed the country's major chain of do-it-yourself stores and at 30 was elected the youngest board member in the history of Banco de Chile, the largest Chilean bank. In each instance, he helped guide the organization through a merger or sale that created greater scale and viability, and he gained a reputation for his calm in the face of disaster and for his negotiation skills. Moreno quipped that his career path was unusual because he never was a traditional employee. "I was always the boss," he said.

SOLUTIONS THROUGHOUT THE WORLD

In 2005, Moreno was president of ICARE, a key Chilean business association that includes more than 600 Chilean companies and also works with companies elsewhere in Latin America. "We nicknamed him the Chancellor, the Foreign Minister, as his diplomatic and negotiation skills were exceptional, unique, and savvy," said Hans Eben, Moreno's predecessor as head of the group. When Piñera, a former fellow professor at the Catholic University, was elected to lead Chile in January 2010, he tapped Moreno for the real foreign minister job.

The Foreign Affairs Ministry in Chile combines what Americans think of as secretary-of-state duties with those of the country's trade representative. As someone accustomed to being thrown into the deep end of the pool, Moreno jumped right in. "If the president asks you for something, then you cannot say, 'No,'" he said. "It was an honor, and it's been a very, very interesting time."

He had no idea when he took the job how interesting things would get, and how quickly.

In late February 2010, the sixth largest earthquake ever recorded struck Chile, killing more than 500 and causing $30 billion in damage. The presidential inauguration was halted at one point because of aftershocks.

"In one minute we lost a third of our hospitals, a third of our schools," Moreno recalled. Emergency hospitals were set up by several international aid organizations. The Chilean government quickly teamed with , among others, the US Department of Commerce International Trade Administration and the US Embassy in Chile to establish the Rebuild Chile Expo, an event and program that connected US companies with opportunities to help in post-disaster reconstruction.

No sooner was rebuilding underway when, in August, a gold and copper mine in the northern city of Copiapó collapsed, trapping 33 miners for 69 days. The miners were confined to a shaft 2,300 feet below the surface. For 17 days, the world didn't know if they were dead or alive.

Moreno recalled that a committee fielded 200 ideas a day on how to keep the miners alive and how they could be rescued. "There were hundreds of ideas," Moreno said, "some of them stupid, some of them very bright, some of them useful, some of them not." NASA was asked to consult on how to deal with the psychological effects of such a long period of isolation.

A year later, Moreno traveled to the Smithsonian National Museum in Washington, DC, for the opening of an exhibit commemorating the safe rescue of all 33 men, "Against All Odds, Rescue at the Chilean Mine."

"To face this challenge, which was filled with thousands of smaller challenges, we had to look for solutions throughout the world," Moreno said at the exhibit's opening.

Just as Moreno was preparing for the commemoration, a massive student demonstration broke out in Santiago over a lack of funding for public education and consequent lack of opportunity for young workers. Subsequent protests flared up intermittently through the rest of Piñera's administration.

The demonstrations highlighted the question of whether economic progress was fast enough. Moreno pointed out that average income grew to $20,000 a year from $15,000 a year at the start of the Piñera administration, outpacing the rest of Latin America as a whole. Chile has almost tripled its income per capita since 1990.

"We're very close to what international organizations call a developed country," Moreno said. "Income in a developed country is around $24,000 or $25,000. There's no developed country in Latin America - Chile has the opportunity to be the first one." In May 2010, Chile became the first South American country admitted to the Organization for Economic Cooperation and Development (OECD), an economic policy organization of countries from across the globe.

ONE DOZEN HORSES

As the top official overseeing trade, Moreno sought to diversify the nation's reliance on copper. Chile is the world's largest producer of the red metal, supplying about one-third of world demand.

The free trade agreement with China made the Asian giant Chile's largest trading partner. The expanded relationship helped boost Chile's exports by 22 percent since 2005. Over a long period, copper declined from 80 percent of exports to just half, according to Moreno. Pulp, agricultural products, and fish represent the other half. Chile is, for instance, the world's second largest supplier of salmon. "These industries were completely nonexistent a few years ago," Moreno said.

"Chile has pursued an effective strategy of protecting its economy from the dangers of having such a strong reliance on one commodity," said Peter Siegenthaler, lead economist and sector leader for Andean countries at the World Bank.

Moreno also went looking for other trading partners. He signed free-trade agreements with Malaysia, Thailand, Turkey, and Vietnam, expanded an agreement with India, and began talks with Indonesia.

Beginning in 2010, Moreno entered negotiations to create the Trans-Pacific Strategic Economic Partnership Agreement, a free-trade deal involving the United States, Canada, and 10 nations in the Asia-Pacific and Latin American-Pacific regions.

In Latin America, intracontinental commerce makes up only 29 percent of trade, Moreno estimated. There is no transcontinental highway or railroad that connects the two sides of the continent, and regional animosities repeatedly blow up into mini trade wars. Moreno spearheaded the Pacific Alliance in 2012, an open-trade agreement among four Latin American countries bordering the Pacific. It removes tariffs on goods and services, eliminates visa requirements, integrates capital markets and is geared to expanding trade with the Asia Pacific region.

"Establishing the Pacific Alliance was an important trade policy initiative with promise for the future," Siegenthaler said. "Fostering economic integration among countries with similar economic and trade policy orientations, this Alliance should have a positive effect for the participating economies and opens up opportunities to establish linkages with countries on the opposite side of the Pacific, a highly dynamic area."

Moreno also participated in the launch of an initiative to give Chile its own Silicon Valley. In 2010, the country created Start-Up Chile, a seed-accelerator program to attract entrepreneurs to Chile. Entrepreneurs receive a small subsidy to set up production, and this year around 2,000 different groups from 60 countries are making products in Chile, he said.

As he prepared to step down, Moreno enjoyed an approval rating of 73 percent, the highest of the ministerial cabinet. His efforts to deepen regional trade, attract innovative industries, and professionalize the foreign service have grown deep roots in only four years. He has taken the foreign ministry from 50 percent career ambassadors to 80 percent and changed the training and evaluations of its employees and, in so doing, has changed the way Chile is perceived around the world.

What's next? He may return to chair the national telethon that raises funds for the disabled. (See "27 Hours," above.) He'll spend more time on his farm, where he and his family raise horses that perform in the Chilean Rodeo and at equestrian events around the world. He flew one dozen of his horses in a cargo plane to London for Queen Elizabeth's Diamond Jubilee celebration in 2012.

He'll also have more time to devote to Booth's Global Advisory Board, Americas Cabinet, on which he has served since 2006. As a board member, he helps recruit Chilean students to Booth and advises the school on strategies for raising its profile in Chile.

Moreno said his Booth education prepared him to be successful in a range of endeavors by teaching him to understand underlying problems and the interests of counterparts, whether they are business customers or foreign governments.

Leadership, Moreno said, lies in understanding the course of events, just like the marshal of a parade. "If you know where the parade is going, then it's very easy to be the leader," he said. "The successful leader knows the way people and events are moving." ■

Photo by Chris Strong 

Alfredo Moreno discusses the Chilean economy, which has prospered with the signing of free-trade agreements. This is a country, Moreno says, that was once the poorest Spanish colony and now has the highest income per capita in Latin America. View the video »

 

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FOUR TUMULTUOUS YEARS

2010

JANUARY
Sebastián Piñera is elected president of Chile and names Alfredo Moreno as foreign minister.

FEBRUARY
The sixth largest earthquake ever recorded strikes Chile.

MARCH
Moreno partners with the United States on the Rebuild Chile Expo to help with reconstruction.

AUGUST
A Chilean mine collapses, trapping 33 miners underground.

SEPTEMBER
Moreno works with international partners, including NASA, on how to rescue and help trapped miners deal with the long isolation below ground.

2011

JANUARY
The government launches Start-Up Chile, a seed accelerator program to attract entrepreneurs.

AUGUST
Students demonstrate in Santiago for access to public education and better job opportunities.

2012

JUNE
Chile and three other Latin American nations form the Pacific Alliance, a free-trade pact.

SEPTEMBER
Chile signs supplementary free-trade agreement with China, paving the way for expanded investment by the Asian giant.

2013

APRIL
Moreno meets with United Nations Secretary- General Ban Ki-moon at UN Headquarters in New York. OCTOBER Chile concludes a free-trade agreement with Thailand.

2014

JANUARY
Chile and the United States mark the 10th anniversary of their free-trade agreement, which boosted Chile's trade more than four-fold to $28.1 billion in 2012.

 

THE CHICAGO BOYS

In the early 1970s, Chile's inflation rate reached 150 percent. The country had no foreign reserves, and 48 percent of Chileans lived below the global poverty level. A group of mostly University of Chicago - educated Chilean economists known as the "Chicago Boys," wrote a 500-page plan to turn the economy around. Nicknamed El Ladrillo (the brick), the plan called for economic liberalization, privatization of state-owned industries, and control of inflation. At that point, its authors were mostly on the edges of government and decision making, so the plan languished until taken up by then president Augusto Pinochet. The head of a military government that had ended almost 41 years of democracy with a coup d'état, Pinochet brought eight of El Ladrillo's authors into his administration. Nine other University of Chicago graduates, most trained by the late University of Chicago Nobel laureate Milton Friedman, were part of the government or oversaw the pension system.

They are credited with creating what Friedman called "the miracle of Chile." The reforms continued after Pinochet left office in 1990, Alfredo Moreno said. "What we learned at the University of Chicago was, if you open the economy, when you eliminate the barriers to imports, then you eliminate the barriers to exports," he said. "If you open the economy, you will be more efficient and that will allow you to create new industries. And that was completely true for Chile." ■

 

27 HOURS

Chile is a long, narrow country with 17 million people and a fragile safety net. There is no room in the government budget for the sort of social services that developed countries take for granted. For example, "there are no funds to take care of disabled people," Alfredo Moreno said. In 1978, inspired by the Jerry Lewis MDA Labor Day Telethon, now the MDA Show of Strength, the Chilean TV star Mario Kreutzberger, known popularly as Don Francisco, began a telethon to raise funds to return the country's one existing rehabilitation center to operation. Today that organization, Teletón, one of the largest of its type in the world, leads care of disabled children in Chile and has built 14 rehabilitation centers. Before becoming foreign minister, Moreno was chairman of the foundation that oversees the money raised, as well as the construction and management of rehabilitation centers spread throughout the country.

"He [Moreno] is a very good manager," Don Francisco said in an interview. "We are now quite a large organization, and he helped us organize our economic side. We were very successful when he was chairman." 

The annual telethon lasts 27 hours and is a huge national event. People must go to a bank branch to contribute money and last year, in a country with 4.5 million families, 3.2 million families did just that. The telethon raises an average of $60 million a year and has expanded to 14 Latin American countries.

"We have changed the mentality of the country about any kind of disability," Don Francisco said. Universal access laws are now in place, a step in which Moreno was instrumental. "He understands the needs of the children, but more importantly, he is a wise friend. We became a better organization under his management." ■

 

Last Updated 4/23/14