Case | HBS Case Collection | March 2010 (Revised May 2013)

Chile's Copper Surplus: The Road Not Taken (A)

by Laura Alfaro, Dante Roscini and Renee Kim

Abstract

In 2008, Andres Velasco, Chile's Finance Minister, was under mounting criticisms over his fiscal policy. As the world's largest copper producer, Chile was benefiting from the rise in copper prices, which had more than tripled since 2003. Copper revenues translated into greater income for the government as Chile's biggest copper producer, Codelco, was a state-owned enterprise. Velasco had chosen to save the bulk of the copper revenues into two stabilization funds; by the end of August 2008, the collective amount represented more than 20% of Chile's GDP. Several critics wanted the funds to be used to improve the poor public education system, income gap, and other impending social issues. After all, Chile had one of the most unequal distributions of wealth in the world. Productivity was stagnant and economic growth had slowed down significantly since the 1990s. What should Velasco do amid growing public discontent? Was it really in Chile's best interest to keep saving the copper wealth?

Keywords: Developing Countries and Economies; Economic Growth; Metals and Minerals; Investment Funds; Policy; State Ownership; Wealth; Chile;

Language: English Format: Print 25 pages EducatorsPurchase

Citation:

Alfaro, Laura, Dante Roscini, and Renee Kim. "Chile's Copper Surplus: The Road Not Taken (A)." Harvard Business School Case 710-019, March 2010. (Revised May 2013.)

Related Work

  1. Supplement | HBS Case Collection | March 2010 (Revised May 2013)

    Chile's Copper Surplus: The Road Not Taken (B)

    Laura Alfaro, Dante Roscini and Renee Kim

    In 2009, Chile's Finance Minister Andres Velasco's fortunes had been reversed. His fiscal policy that had come under attack just a year ago had been used to finance a $4 billion fiscal stimulus package amid the global economic downturn. Velasco was now Chile's most popular minister. However, the future of Chile's fiscal policy was questionable with the election of a new president, Sebastian Pinera, the first conservative leader to lead Chile in two decades.

    Keywords: Developing Countries and Economies; Financial Crisis; Financial Strategy; Financing and Loans; Policy; Government and Politics; Chile;

    Citation:

    Alfaro, Laura, Dante Roscini, and Renee Kim. "Chile's Copper Surplus: The Road Not Taken (B)." Harvard Business School Supplement 710-020, March 2010. (Revised May 2013.)  View Details
    CiteView DetailsPurchase Related

  2. Case | HBS Case Collection | March 2010 (Revised May 2013)

    Chile's Copper Surplus: The Road Not Taken (A)

    Laura Alfaro, Dante Roscini and Renee Kim

    In 2008, Andres Velasco, Chile's Finance Minister, was under mounting criticisms over his fiscal policy. As the world's largest copper producer, Chile was benefiting from the rise in copper prices, which had more than tripled since 2003. Copper revenues translated into greater income for the government as Chile's biggest copper producer, Codelco, was a state-owned enterprise. Velasco had chosen to save the bulk of the copper revenues into two stabilization funds; by the end of August 2008, the collective amount represented more than 20% of Chile's GDP. Several critics wanted the funds to be used to improve the poor public education system, income gap, and other impending social issues. After all, Chile had one of the most unequal distributions of wealth in the world. Productivity was stagnant and economic growth had slowed down significantly since the 1990s. What should Velasco do amid growing public discontent? Was it really in Chile's best interest to keep saving the copper wealth?

    Keywords: Developing Countries and Economies; Economic Growth; Metals and Minerals; Investment Funds; Policy; State Ownership; Wealth; Chile;

    Citation:

    Alfaro, Laura, Dante Roscini, and Renee Kim. "Chile's Copper Surplus: The Road Not Taken (A)." Harvard Business School Case 710-019, March 2010. (Revised May 2013.)  View Details
    CiteView DetailsEducatorsPurchase Related

About the Authors

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Laura Alfaro
Warren Alpert Professor of Business Administration
General Management

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Dante Roscini
Professor of Management Practice
Business, Government and the International Economy

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