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Santiago: A Standout Latin American Performer in 2011

2/16/2012
This is an excerpt from the recently released Global MetroMonitor 2011 Report published by the Brookings Institution Metropolitan Policy Program.

Located along the western edge of South America, Santiago serves as Chile's capital city. The Santiago metropolitan region, home to nearly 7 million people, is the engine of the Chilean economy, accounting for 40 percent of the country's economic output. As a result, Chile's growth is deeply intertwined with development in Santiago.

Santiago has developed rapidly over the past two decades and recovered quickly after its economic downturn in 2009. Since 1993, GDP per capita has increased 66 percent in the Santiago metro area. Between 2010 and 2011, Santiago's economy experienced strong growth. Its income rose by 5.7 percent and employment by 4.9 percent, easily besting worldwide averages and ranking the metro area's economic performance ninth among the world's 200 largest metro areas, and first among Latin American metro areas.

After a devastating 8.8 magnitude earthquake on February 27, 2010, President Sebastián Piñera's "Let's Get to Work" plan helped accelerate the growth of the Chilean economy. The earthquake occurred 200 miles southwest of Santiago, destroying more than 200,000 homes, almost a thousand miles of roads, as well as ports, hospitals, schools and other buildings. The reconstruction effort that has taken place in the wake of the $30 billion disaster has boosted consumption spending, as well as construction and infrastructure investments.31 As a result, Chile's economy grew by 6.3 percent in 2011, even faster than in its first year of recovery.

But Santiago's growth patterns surpass national trends. The metropolitan region grew slightly faster than the country as a whole in 2010-2011, driven by its largest sector, business and financial services. Santiago has a strong financial district, including large banks such as Banco Santander-Santiago, the Chilean headquarters of the European multinational. Santiago is also strong in industries that have been expanding more rapidly than their national counterparts, such as transportation, trade and tourism, and local/nonmarket services. Indeed, trade (including wholesale and retail trade) and tourism is Santiago's third-largest industry, accounting for 16 percent of the metro's output. Driven by higher consumption spending, this sector was responsible for a disproportionate share of Santiago's economic growth-26 percent-between 2010 and 2011.

While growing overall, Santiago's economic performance was volatile between 2007 and 2011. Future changes in commodity markets and trade patterns will influence the metro area's trajectory. Commodities represent a small share of Santiago's economy, but any major fluctuations in the price of Chile's top export, copper, will have wide repercussions across the country, including Santiago. Chile's top export market, China, has witnessed a cooling housing market, which could dampen copper consumption there.

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