Moreover:
- It is essential to develop our capacity to tackle global markets on an equal footing.
- Selling and transferring assets to international investors has benefitted the country.
“I am a rare mix…”, are his opening remarks. And then he goes to great lengths about the fundamentals of such alleged rarity and the facts behind it:
The alleged mix consists, he explains, in that “I have not limited myself solely to the curricular studies of my profession as lawyer, but I have also ventured into the realm of economics and other related fields, because I understand (and these are the reasons) that nowadays, in order to perform efficiently, a much greater degree of preparation is needed. Only in this way can we deal on an equal footing with our global market partners gaining a position of “strength” that is essential to develop sound business activities.”
The author of these thoughts is José Luis López Blanco, and the curriculum he doles out at the end of the interview testifies, throughout its eleven pages, that the concept of “rare mix” does not do full justice to so much eccentricity: attendance at more than ten seminars on economic and financial matters, including (unusual for a lawyer) one on mathematics, more than twenty publications in Chilean and foreign entities, and activities ranging from foreign trade to bank management and forestry industry management.
The institutional result: José Luis López y Cía. and Asesorías de Comercio Exterior S.A., both in charge of legal, commercial, and financial advice to groups the size of Carter Holt Harvey, the Fletcher Challenge Group, Mair and Co., Cameron Hombostel, in addition to a dozen of other companies and groups of domestic companies.
The personal result: the capacity to teach numerous seminars, in Chile and abroad, on foreign trade-related matters and, also, why not, to give an interview that looked more like a brilliant and masterful class on the legal, sociological, economic and cultural origins of free trade in Chile and of the reasons that merit its consolidation and continuation.
In the name of King Ferdinand VII
Santiago, 21 February 1811.-
“The Provisional Governing Board, which on behalf of King Ferdinand VII commands this kingdom, considering the current state of affairs in Europe and that all men have certain indefeasible rights endowed upon them by the Creator to seek their happiness, prosperity and well-being, and in view of the dossier about this matter has created and decreed the following: 1. From the date of this decree onwards, the ports of Valdivia, Talcahuano, Valparaiso and Coquimbo are free to trade with the foreign, friendly and allied powers of Spain and also with other neutral powers.”
On this point, José Luis moves his finger down a few centimeters to indicate the Customs Ordinance of 1811, which states: “Art. 19. The maritime introduction of money to buy the country’s fruits or effects and ship them abroad, stating their destination, will be entirely duty-free”. Then: “Art. 30. Foreign manufacturers, farmers and artisans from the time they set foot in this Kingdom, must be deemed natural of it, therefore, their invoices will be looked upon as from the country so that they enjoy the tax rebates and extensions that might be granted to them…”.
Encouraged by these citations, José Luis López argues all out in favor of the various provisions that in the current times of the Kingdom favor the entry of foreign investments: “My concept about the rules to be issued on foreign trade is that they should subsume the idiosyncrasy of the country and what has always been its spirit and attitude on this topic; which, in the case of Chile has always been that of not preventing or impeding entering into such business activities. You have seen it: the first legal provisions that our history picks up go right to the establishment of unrestricted freedom of trade.
And this situation remained for many years, in fact, a full a century and a half, a period in which Chile was actively involved in world trade. Chilean businesspeople became involved in the business of gold in California, our ships sailed across the Pacific and traded with East Coast locations, our currency and securities were traded at the London Stock Exchange. And, of course, we welcomed foreign investments without any kind of limitations. And so it was until the crisis of the thirties, at the time when Chile turned inward, seeking protection against the disaster, issuing the first laws of foreign exchange control; laws that were considered and so stated in the body of such provisions, as emergency “transitional laws”. In fact, foreign trade and foreign investment -which had become protected by the umbrella of the Chilean State- were nationalized.
Only in 1950 did this situation change somewhat, and only now, in recent years, have we restored the conditions of economic freedom that were original to us. In truth, today it is clearer than ever that the concept of “island-economy” is unsustainable: it is necessary to connect with the world, invest and let invest, export and import. In sum, to engage in foreign trade without restrictions or complexes.
And throughout this entire process, foreign investment is key, a key that was otherwise raised by Jorge Ahumada in his groundbreaking work En vez de la miseria (Instead of misery), written in 1957, long before his political party comrades began to drift towards social communal conceptions to which the party ascribed as of 1964.”
It is one thing to know the key to something, but quite another to own it. How can we massify foreign investment for it to have a large-scale impact on the pace of economic development?
“Of course, but rather than taking about “foreign investment“, a term with negative connotation these days since it evokes images of colonial exploitation by invading powers, suggesting the existence of “enclaves” or factories isolated from the rest of the country, I would rather talk about “international investment”, which is not a mere change of words, because it implies the profound structural changes that have taken place in this area. It is no longer possible for anyone to assume such a rapacious attitude, such a corsair-like approach eager to run away with the loot at the least possible cost.
Relationships nowadays are so multiple and varied, the options are so many, the information so widespread and massive that trade relationships tend to have a “joint” structure, as reflected in today’s proliferating “Joint Ventures”. Nobody pretends to own and keep everything; it is understood that a collaboration is required for those involved to obtain adequate compensation.
And in that context, international investments should not be seen as a threat, but as an opportunity that implies, of course, that we should be prepared to participate from a position of strength, as I explained earlier.”
Accepting your assumption, the provisions of Chapter 19 should then be approved without question.
“Indeed, because at the time of its creation it provided an appropriate solution to the situation then confronted. Chile chose a sensible path that implicitly meant a real acknowledgement on the part of creditors that they had to “withstand a loss”; therefore, should there be a damaged party, that would not be us.”
What about the sale and transfer of assets? Has it also harmed foreigners?
“At any rate, it has not been the inequitable and crude business deal that some have described. In fact, it has allowed the realization of activities and businesses that would not otherwise have existed, as stated by Antonio Recabarren, in his diary.
Although I do not agree with him that with Copec it was different, taking into account that “the Copec case” occurred in 1985, when the situation in the country was very weak in many ways. The operation overall was beneficial: it allowed a company that was literally grounded to recover, and now you see that it is committed to investments in orders of magnitude representing billions of US dollars.
But going back to the more general issue of the debt and the sale and transfer of assets, I would add that an approach that would have been based on the expectation of a flat out “write-off” would have been illusory and would have fostered the kind of attitude that seeks easy, short-term, sky-fallen solutions. Such is precisely the kind of attitude that we should prevent if we intend to assume a position of strength, as I dwelled on above.
All this is essential to conduct business affairs on an equal footing. Chile has learned from its history and continues to learn every day. Maintaining and reinforcing this attitude is paramount. Let us duly appreciate the conditions that have led us from being mere landowners to now having first-rate workers and entrepreneurs.”
Do you consider the Central Bank organizational law to be one of the “revisions” bequeathed to the next government so that it does not forget the lessons of the past?
“Although I am not one hundred percent cognizant of the status of this draft bill, which I am currently studying in further detail, I am quite certain about its main objectives. At any rate, I wonder what Mr. Büchi could have done to implement its measures, had he faced a central bank already organized according to the provisions of this bill.”
In Mr. López’s view, the development and consolidation of free trade with the world is quite promising for Chile. He does not fear that efforts in that direction will be lost due to the continuous deterioration of our terms of trade, a process by which the relative value of manufactured goods is increasingly greater than that of raw materials or semi-processed products.
“We are reaching the stage of exporting manufactures -he assures – for whose success the current stage was and is indeed necessary. Nobody is going to buy us a piece of furniture instead of raw wood simply because we are seen as politically friendly, or because we decided that “from now on we will only export night tables and chest drawers and ignore round logs”.
We must make our production credible to conquer markets gradually and efficiently with quality products. This is a long-term process, but in the end, it pays off as it has already in many areas that, until recently, did not even exist. Therefore, we need to move forward calmly, cautiously, and sensibly.”
Are you not afraid that social pressures might become unleashed during the next government to the point of grounding everything?
“These pressures are bound to exist, but they must be confronted without fear. There will be, it is true, expectations and needs that will have to be solved, but I think the recipe is to balance redistribution with growth.
And with regard to redistribution, entrepreneurs have a responsibility that goes beyond that established by the government, especially in the field of training, where it is essential to integrate as many people as possible into the system by empowering them to perform well in increasingly sophisticated productive activities, thereby not only further strengthening the country’s economy, but also demonstrating that everybody has a stake in the success of our free market system.
The long-range survival of the model hinges on succeeding this crucial test.”
