Chile's copper boom coincided with the wider Latin American commodities boom of the mid-2000s. Increased East Asian demand for commodities such as oil, iron ore, copper and soybeans spurred significant growth across Latin America's economies. Steady Chinese demand also enabled countries that would have otherwise been vulnerable to global slowdowns to ride out the economic recession in 2008 and 2009.
As Chinese demand for commodities increased, the average price of copper skyrocketed. It grew from $1.87 per pound in 2005 to $4.05 per pound in 2011, but dipped to $3.32 a pound by 2013. Consequently, the Chilean national government's direct revenue from state-owned copper firm Codelco, which produces almost 30 percent of Chile's copper, dipped from a high of $6.9 billion in 2011 to only $1.9 billion in 2013. The slowdown in global demand observed during the past two years has slowed Chile's economic growth and hurt public finances, precisely because of the country's extreme dependence on a single metal.
For several decades, Chile's copper mines have been the primary drivers of economic growth. The metal makes up 20 percent of the government's revenue, and copper and copper products made up 52 percent of the country's exports in 2013. Chile is the top producer of copper in the world, yielding more than 30 percent of global output with 5.7 million metric tons per year.
While Chile's position as the world's largest copper producer will not be threatened over the next several years, low prices abroad have resulted in short-term financial problems for the country. In addition, high electricity prices and diminishing mineral deposits have inhibited Chile's ability to quickly increase production levels. As a result, Chile's economy will grow more slowly over the next few years, and Chilean President Michelle Bachelet will have difficulty implementing desired reforms.
