Chile, Canada and the New Global Scenario

The following is the full text of a speech by Heraldo Muñoz, the Chilean Minister of Foreign Affairs, at a Canada 2020 event in Ottawa on April 19, 2016.

“I wish to thank Canada 2020 for this invitation. I´m pleased to be present at this think tank, which has defined as its goal the “building of a community of progressive people and ideas that will move and shape governments.” It is a great opportunity to explain how Chile, a middle-income country, with a progressive government, is dealing with the current regional and global challenges.

Our world is increasingly complex. Globalization is the most visible manifestation, yet it´s not the only factor. We live in a digital era which has accelerated the future at a surprising speed. We are witnesses to a world scenario far from the peaceful context expected in the 1990's, at the outset of the post-Cold War era.

The recent attacks in Brussels are an example of the increasingly complex world in which we live. We face threats such as terrorism, cyber terrorism, pandemics and humanitarian crises. Radical groups like ISIS or Boko Haram seeking territorial domination and global reach have been able to destabilize countries, and even regions.

The challenge for foreign policymakers is how to skillfully combine principles and national interests in the best way possible for addressing the complex challenges of this turbulent world.

How should we deal with today´s economic, social and cultural global challenges so different from those of past decades, when no one had a PC or even dreamed of an iPad, but when the Soviet Union still existed?

A recent study by three MIT economists states that technological advances are not just changing, but already have changed the world economy. No longer will success depend on cheap labor or physical capital, but rather it will accrue to those who innovate and create new products, services and business models. Good ideas will become the scarce resource and reap the benefits of the new economy. Digital rather than physical capital will rule.

There are new winners and losers arising, and we will increasingly witness the installation of a Pareto curve; that is, the few who innovate will benefit in a disproportionate way of the economic benefits. We can see that already.

An example is the bankruptcy of the video rental company Blockbuster versus the huge success of Netflix. The Blockbuster business model was based on thousands of retail locations and customers having to travel to those stores, select and pay for videos, and be penalized by late fees. Netflix, by using the web, instead charges customers for subscriptions and we can watch movies or TV series from the comfort of our own living room. This is the power of “disruptive innovation” in the digital era.

In parallel, we are witnessing an economic slowdown and a steep fall in the prices of most commodities, the centerpiece of the export strategy of most Latin American economies, provoking low growth and, in some cases, recession. Martin Wolf of The Financial Times has argued that the world economy is de-accelerating not only cyclically but structurally. Low interest rates and not even negative interest rates are creating dynamism in the world economy. Some already talk about distributing money directly to consumers to stimulate demand.

China´s economic shift from investment in infrastructure to investment in consumption is part of the reason behind the end of the commodities boom. The “new normal” for Latin America and other regions would seem to be low economic growth. Long term prices for copper, Chile’s main export, indicate a value decline of 13.8%. That´s why the government has implemented a moderate fiscal adjustment, unlike other countries of the region that have made greater sacrifices, thanks to our long-standing counter-cyclical economic policy and a recent tax reform,

This world is no longer that of the postwar international order, described so well by Dean Acheson in his famous work “Present at the Creation”. The emergence of the United Nations, NATO, the Marshall Plan and the creation of many international and regional organizations were symbols of those times. Today, our reality is very different. If we had to write a book about the present moment, what would be its title? Probably: “Present at the Diffusion.”

The development of science, technology, creative capacity, and innovation also has an impact on the way power is distributed.

We are witnessing the diffusion of power. Social media empowers our citizens to challenge political systems and demand accountability, through a sort of direct democracy. There is, above all, intense public scrutiny, changing both the behavior of our elites and the relationship between citizens and power.

The closeness generated by Facebook or Twitter and the wide availability of smart phones makes us experience the hopes, frustrations and anger of others directly and in real time. These are times of hyper-connectivity that empowers individuals, rather than institutions. The problem is, as Zygmunt Bauman has affirmed, that social networks can create a “substitute of community”, while the real dilemma is how to interact and dialogue with those who think differently.

I believe that authority is collapsing at different levels as power diffuses among actors and regions. And global governance is under siege.

The prolonged conflict in Syria, the crisis in Iraq, the absence of governance in Libya, and the threats to security and stability throughout the Middle East and Africa, have led to the greatest refugee crisis since the end of WWII, and to a humanitarian crisis in the Mediterranean.

Precariousness in the digital era is quite different from the past. The vulnerable, those lacking in material security, know that there are better horizons elsewhere, many own cellular phones and have had electronic communications with others, believe they can escape conflict, contact enablers in the web, and even pay for precarious transportation to a better future. It has been pointed out that a huge number of Syrians began to use the Balkans route to Europe as the word spread on social media about how it worked and how much cheaper it was than other routes.

We must address the root causes of this refugee crisis. Ending the conflict in Syria is only part of the answer, because the eventual end of the conflict will not be the end of the refugee crisis. By way of example, desertification, droughts and floods caused by climate change are causing famines in many parts of the world, leading to the forced migration of thousands.

Latin Americans sympathize with the displaced and forced migrants. The wave of dictatorships in the 70's and 80's led to the exile of thousands. Many of them found refuge here in Canada. In Central America, crime, drug-trafficking and violence force the illegal migration of hundreds of thousands moving towards the United States, with women and unaccompanied minors becoming a growing number in this phenomenon.

Chile — and I believe all of Latin America — wants to be part of the solution to the ongoing refugee crisis. This is why the government of President Michelle Bachelet has decided to voluntarily receive a number of Syrian refugee families in our own country. We are working with UNHCR to mobilize the funds and materialize this decision at the earliest time possible. The generosity of Canada to open its doors to thousands of refugees has been an example.

A significant part of the problem is that the refugee and illegal migration problem is global, but our responses tend to be national and, worse, local. We are lacking an adequate global governance to deal with global humanitarian crises. The UN institutions do what they can, but they are overwhelmed and under-financed; and they cannot deal with interdependence challenges when the logic of international organizations is member-state based.

The challenge we face is compounded as the new realities coexist with old ones. Historical progress is not lineal; there is forward and backward movement –-“corsi e ricorsi” as Italian philosopher Gianbatista Vico affirmed. In other words, the new digital era does not prevail fully, while the old order does not disappear entirely either. In short, the old and the new economies coexist.

These are just some of the global and regional challenges we face. But what do they mean for a middle-income country like Chile. How do these challenges relate to our foreign policy?

First, we have to deepen our openness to the world and add value to our exports.

Second, we must contribute to global governance, particularly in the most sensitive issues for Chile.

And third, continue to prioritize Latin America and the Caribbean, promoting convergence in diversity; in other words, a pragmatic regionalism.

The ability to innovate and to create added value is fundamental for national economic growth.

For Chile, the transition from an economic model based on the production and export of natural resources to one based on creativity and innovation is a must. Of course, we can also innovate by adding value to our natural resources.

Chile is an open economy with a wide network of trade agreements: 25 free trade agreements (FTAs) with 64 countries, accounting for 94% of Chile’s exports. Our main challenge is to add value to our products as well as integrate ourselves to global and regional value chains.

We are negotiating new free trade agreements with Indonesia, for example, while pursuing talks with the Philippines and continue working on the updating of our agreements, including the Canada-Chile FTA, in order to increase cooperation in key areas, such as innovation, science and technology, and education.

The FTA Chile-Canada has proven to be a great success. Since its entry into force, bilateral trade has grown at annual average of 7%. Canada is one of the top ten trade partners of Chile, reaching in 2015 almost US$ 2 billion. In the last two years, our bilateral Agreement was modernized, incorporating chapters on Sanitary and Phytosanitary Measures and Technical Barriers to Trade, as well as several improvements to the Rules of Origin and to the Government Procurement chapters. We expect that the Canadian authorities will complete their domestic procedures soon, bringing these modifications into force.

Let me add that Chile is Canada’s third largest investment destination in Latin America and the 8th worldwide; actually, Canada is Chile’s main investor in mining.

China has become the main trading partner for Chile and other Latin American countries. We are advancing in the implementation of the Plan of Action signed during the bilateral visit of Prime Minister Li Keqiang last year. Moreover, we are negotiating with China an update of our bilateral trade agreement.

Another important step is the Trans-Pacific Partnership Agreement (TPP), which brings together 12 countries on the Pacific Rim, accounting for 485 million people and close to one third of world trade, including Chile and Canada. This agreement sets and raises the global standard in the trade of goods, services, and investment, as well as other trade disciplines.

In addition to the benefits that our citizens will have from greater access of our goods and services to TPP countries, while protecting our sensitive sectors, the agreement will enhance Chile’s participation in global value chains, which will expand and diversify the export basket of our country. The TPP provides for a system of accumulation of origin between the 12 member countries, which considers as a country’s own, the goods originating in another country belonging to the bloc. In this way it will further encourage trade flows between partners and integration into their supply chains.

But we must also go beyond the economic sphere; we need to take advantage of our existing innovation niches. Chile should project itself as a country of architects and creative artists, based on Alejandro Aravena´s recently won Pritzker Prize, on the fact that he’ll curate the Venice Architecture Biennale, and taking advantage of the fact that Chile won the second prize for best pavilion design at Expo Milan.

We ought to be a country of filmmakers, building upon the Oscar of the Academy awarded to a group of young Chileans for their short film “Bear Story.” We should also be a country of astronomers, given that in 2020 we will have 70% of the planet´s observatory capacity and that Chilean astronomers have discovered new planets. In other words, we must project ourselves not only as a country of poets, but also of architects, filmmakers, astronomers, and even gourmets.

This is why we are working with “Fundación Imagen de Chile” — which I chair — to implement a country brand strategy that seeks to highlight the positive and distinctive characteristics of our identity worldwide.

The second major implication for Chile of the present world context is that we need to contribute to global governance in some key issues, such as climate change, Antarctica and the Oceans.

At COP 21 we adopted a legally binding agreement that establishes a comprehensive action plan to avoid the dangers of climate change by limiting global warming below 2 ° C.

Chile is one of the countries most affected by climate change. In March 2015, the Antarctic Peninsula registered the highest temperature since official records are kept: 17.5 Celsius. Three days later in northern Chile, in the Atacama Desert, it rained in one day the equivalent of 14 years, causing a massive natural disaster that left huge material and human losses.

This is why we are interested in the idea of holding a Summit of the most vulnerable countries in the world, so as to exchange experiences, learn good practices and make concrete proposals. Climate change is not abstract, it has real consequences that affect our citizens and, as such, it´s a challenge for foreign policy.

In this context, last October we hosted the second “Our Ocean” Conference in Valparaíso. This US-Chilean initiative seeks to promote conservation and sustainability of our Ocean as an instrument to control climate change. At the Conference, delegates made numerous commitments, including the establishment of marine protected areas, and allowed for the creation of new alliances between nation States and non-governmental actors.

We welcomed Canada’s support for the “Because the Ocean” Declaration at the COP21 — led by Chile, France and Monaco — , which was key in the inclusion of the protection of marine environments as a means of reducing climate change. Another sign of our shared commitment is the ongoing negotiation between Polar Knowledge Canada and our Antarctic Institute of an agreement regarding cooperation and scientific research in the Arctic and Antarctic regions. Chile will host the Antarctic Treaty member states by the end of this year, an opportunity to highlight our commitment to the multilateral approach to address and protect this region.

A major issue relevant for global governance is the 2030 Agenda and the Sustainable Development Goals, agreed upon in September last year in New York, with Chile ´s active support. The 17 ODS make up an integrated and indivisible whole of the three sustainable development pillars: economic, social and environmental. Since January, Chile is a newly-elected member of the UN Economic and Social Council (ECOSOC). Our priority will be inclusive development and the implementation of a monitoring mechanism for the 2030 Agenda and the SDGs.

Equality and non-discrimination are integral to democracy. We have witnessed the effects of discrimination, such as prejudice, abuse and violence. The government of President Michelle Bachelet believes that discrimination can be fought by implementing social reforms, to “level the playing field” and give citizens greater opportunities, and allow our country to reduce the inequality gap, particularly in access to quality education.

Regionally and globally, we will continue to promote resolutions that seek to defend the rights of victims of discrimination: LGBTI people, women, children, the elderly, migrants, indigenous peoples and persons with disabilities. We know that Canada is our partner in many of these endeavors and we have much to learn from you in this regard.

Seeking to enhance governance and peace, as a non-permanent member of the Security Council in 2014 and 2015, Chile espoused the view that conflicts must be seen through a wider lens, recognizing that political, economic, social, ethnic, religious and cultural factors all play a role and that peace and security are complex issues. Inclusive development is crucial for conflict prevention, to avoid humanitarian crises and to consolidate peace processes.

Let me remind you that Chile and Canada were key players in the promotion and implementation of the “Responsibility to Protect” initiative that became a reality in the UN a few years back. This was another demonstration of our like-mindedness and of our respective commitment to global governance and human rights.

As a responsible actor in global affairs, Chile has actively engaged in peacekeeping operations.

Haiti is the most important peace operation for Chile; representing a large portion of the 75% of peacekeepers that come from Latin America. In parallel, we have also contributed to the process of political stabilization, through the strengthening of public policies and institutions.

Canada has also played a crucial role in the creation of a police force in Haiti, as well as financing a number of important social development programs there. This is in line with Canada’s traditional participation in peacekeeping missions, which started in 1956. Just a year later, one of Canada´s foremost Foreign Ministers, Lester Pearson, received the Nobel Peace Prize for creating the UN Blue Helmets. We foresee many opportunities in the future where, once again, we will be collaborating in countries in conflict to promote peace and development.

Let me add that Chile’s growing approach to Africa and commitment to peace and security has led to our joining the UN Multidimensional Integrated Stabilization Mission in the Central African Republic, MINUSCA, in which Chilean officers have recently begun to participate. We envision a more substantial role in peacekeeping operations in Africa in the coming years.

And because Chile has a good reputation as a responsible actor in global governance, President Obama invited our President to participate in the Nuclear Security Summit, an initiative aimed at preventing and counteracting nuclear and radioactive terrorism. This Summit took place at the end of March in Washington, D.C., where your Prime Minister was also present.

The third and last conclusion of the global challenges I’ve described is that Latin America is and will continue to be Chile’s top priority.

Recently we have seen important political changes in countries in our region as result of elections in Argentina and Venezuela and in the referendum in Bolivia. In Peru we will also see changes in the context of the next Presidential election. Our countries have been able to maintain one of democracy’s basic tenets: the alternation in power through elections.

But democracy, of course, is much more that free elections. A system of checks and balances, independence of the branches of government, civil liberties, accountability and anti-corruption practices are inherent elements of democracy and to allow institutions to work effectively to serve citizens, protecting and strengthening democratic processes.

From Latin America and the Caribbean we speak to the world and should strive to present common views and allow for a closer interaction with other regions. It is feasible to move towards regional integration on issues such as connectivity, movement of people and trade facilitation.

In late June-early July, we will host the Presidential Summit of the Pacific Alliance, taking over the Presidency Pro Tempore of the Alliance for a year. Among other tasks, our emphasis will be on strengthening ties with the 42 observer states — including Canada — the incorporation of SMEs to the Business Council and the establishment of a public-private agenda on innovation issues.

We will also continue to push for convergence with Mercosur, as well as with other blocs, like ASEAN and APEC.

Regarding investments, Chile has deep ties to countries in both the Atlantic and Pacific shores. Between 1990 and 2014, Chile has invested more than 26 billion dollars in Brazil and almost 17 billion in Argentina. Meanwhile, Chilean investments in countries that are members of the Pacific Alliance are 17.5 billion dollars in Colombia and 14.5 billion dollars in Peru.

Chile has a vocation as a bridge between the Pacific and the Atlantic, and among diverse economies, cultures and political traditions. Thus, along with our network of bilateral agreements, we are seeking a closer understanding between the two main trade blocs, the Pacific Alliance and Mercosur, not to merge the two but to agree on a common action plan, which might allow us to reap more political and economic advantages, each one at its own pace. This is what we call “convergence in diversity.”

Along this same line, progress has been made with regard to bi-oceanic corridors, a pending infrastructure challenge to better connect both shores of South America. Chile, Argentina, Brazil, and Paraguay signed an agreement in late 2015 to make these corridors a priority for the short term.

Colombia has suffered a decades-long armed conflict that has caused more than 200,000 victims, mostly civilians, and about 5.7 million people displaced. Fortunately, a peace process between the Colombian government and the FARC guerrilla is about to yield a positive and definite result.

Chile is one of the accompanying countries of this peace process and we have offered our collaboration in the post-conflict phase. This is an important sign of how we are perceived by others, a serious country that contributes with our own experience and hard earned lessons to development at the regional and international level.

Chile has also accepted to become one of the guarantors of the peace talks just launched between the Colombian government and the other guerrilla group in Colombia, the ELN.

With Mexico we continue to strengthen our historically close relationship in trade and political affairs. Both countries have a highly successful free trade agreement and just celebrated 25 years of reestablishment of diplomatic relations, severed during the Pinochet dictatorship. The Joint Cooperation Fund Chile-Mexico, which has been in place for more than a decade, is an innovative financing cooperation mechanism that has become a model for South-South cooperation in the region, implementing projects in Central America and the Caribbean.

To boost our relations with CARICOM, we have recently opened a brand new Embassy in Guyana, while with Central America we launched the SICA–Chile Forum for Political Dialogue and Cooperation, which should result in a vibrant exchange of experiences and triangular and bilateral cooperation with these countries. Public safety, good governance practices, capacity building, gender policies are some of the areas of mutual interest, where Chile is collaborating with our neighbors.

South–South and triangular cooperation has a role to play in our regional policy. For the last several years, the Chile Fund for Hunger and Poverty has financed cooperation projects throughout the world, but preferably in Central America and the Caribbean.

Chile believes that our efforts in the region can be multiplied through Joint Cooperation Funds, such as the ones we have with Mexico and Spain. We hope that soon there will be a Chile–Canada Cooperation Fund, allowing us to focus on common areas and regions of interest, including Central America and the Caribbean.

Relations with our neighbors have been and will be key elements of our foreign policy. We ought to take advantage of the possibility to fully cooperate with our neighbors. There are no benefits for Chile from the instability or lack of progress of our immediate neighbors. The sum of our bilateral interests makes conflict more costly and mutual understanding increases.

Not always relations with neighbors can be future-oriented as we would wish. Bolivia, for example, insists of re-litigating the past having sued Chile at the International Court of Justice to seek a sovereign access to the Pacific Ocean, in gross violation of the 1904 Treaty that established our common borders in perpetuity. Bolivia has access to the sea through our ports, but it insists on sovereignty, a matter resolved more than 100 years ago.

The Bolivian government is not only abusing the international mechanisms for the resolution of controversies, but it´s bent on a hostile policy against Chile that seek domestic political gains at the expense of a common future of integration and prosperity.

The latest is another announced lawsuit, this time on the Silala River, a shared waterway that now Bolivia asserts is merely a stream, having changed its posture that it held during almost 100 years. Dialogue is Chile´s posture. Unfortunately, the Bolivian government prefers a policy of confrontation, motivated by internal problems.

By contrast, we are forging an ever closer relationship with the new Argentine government of President Mauricio Macri. Foreign Minister Susana Malcorra and I signed a Joint Communique in January that identified 15 strategic points for action in the coming years, and we met just a few weeks ago on top of the Andes, along our Interior minister colleagues, to talk about improving the physical connectivity between our two countries. We have begun exporting electricity to Argentina and in May we will begin exporting liquefied natural gas.

With Brazil we maintain a historical friendship and an active political dialogue, plus high trade and investment flows. We observe with attention the political developments there. Brazilian democracy is strong and we trust Brazilians will know how to resolve their own challenges. Within the region we need a strong and proactive Brazil. A recent visit to Chile by President Dilma Rousseff was an opportunity to exchange views on political and trade issues, and on how to improve our infrastructure through bi-oceanic corridors in order to transport goods and services from coast to coast.

Friends, I have addressed some of the issues of the present and the future that represent challenges for our foreign policy. We need to find answers and new ways to solve these national, regional and global challenges of the 21st century, so that we can continue to move toward sustainable development. It won´t be easy. But we have no rational option but to work with each other to build the new international structures for the new realities.

In this second stage of our government we will place a strong emphasis, not only in our region, but on our ties with like-minded countries such as Canada.

We have no time lose. Let´s celebrate our 75 year anniversary of the establishment of bilateral diplomatic relations, in September 2016, with action.

We must open new doors and put our sight on the common vision of the future that incorporates our hopes along with our interests. Chile will continue to be a trusted partner to pursue mutual prosperity, sustainable development and democracy.

Thank you.

Canada 2020 is Canada’s leading, independent, progressive think-tank working to redefine the role of the federal government for a modern Canada. Founded in 2006, Canada 2020 has spent a decade publishing original research, hosting events, and starting conversations about Canada’s future. Our goal is to build a community of progressive people and ideas that will move and shape governments.