Chile Wealth, Inequality, and International rankings

Chile Investment, how to invest in Chile, what to watch out for when investing, economic issues, currency exchange in Chile, and more.
User avatar
admin
Site Admin
Posts: 16690
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by admin » Sat Oct 20, 2018 8:40 pm

41southchile wrote:
Sat Oct 20, 2018 9:31 am
The new groups for household incomes ABC1 has been split .
1 percent of population and 3 percent of Santiago earn over 6.4 million pesos per month
https://www.emol.com/noticias/Economia/ ... Chile.html
looking over those categories, it still does not tell us the most important wealth facts. in particular, do people own their own home? it would seem to be way more important than knowing if someone has access to cable tv to deploying anti-poverty resources.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

User avatar
admin
Site Admin
Posts: 16690
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by admin » Sun Oct 21, 2018 8:32 am

You know Thomas Piketty, in "Capital in the Twenty-First Century" (https://en.wikipedia.org/wiki/Capital_i ... st_Century), get's a lot of crap from the raging anti-socialist crowed; but, they miss his major insight of that book. Specifically, we don't have the stats on both a national or global level, to even start drawing conclusions about wealth and income levels. The basic one is that we need better statistics about global wealth. The one that flips everyone out is his assertion that there should be a global wealth tax; even though he clearly couched it in terms of a token tax just to gather the statistics we need to do an apples to apples comparison of wealth. Yes, a bunch of his other conclusions were pretty half-baked, tacked on to finish the book; but that one is hard to argue against (better statistics, not necessarily a global wealth tax).

On some level, that is by political design. Politicians and the rich don't want the "unwashed masses" to know just how badly they are being screwed over. It is not even a rich thing as much as a once anyone get's any sort of assets under their belt, to protect those assets, they really don't like reporting as that leads to politicians making a grab for it sooner or later. In that respect, Piketty sort of missed the source of the problem: people don't like paying taxes. So, it is probably not the right tool for trying to collect statistics about their wealth.

Even talking about inequality is stupid, when you don't know what that is. In the case of Chile, it seems be increasingly causing problems.

For example, the senses being run has for a several decades been a huge missed opportunity to gather a lot of statistics about wealth, income, and thus inequality standards.

The Chilean central bank just raised interest rates. There was a big controversy about if they should do it, do to the unemployment levels. The central bank set aside the official unemployment stats, and picked up some other secondary sources like pension payments, insurance, and so on to determine that unemployment is actually way lower than reported due to the "gig economy" haven taken hold in Chile.

But, looking at that new income classification system, I can call bullshit on the usefulness of that for determining poverty. I have multiple examples of the old man and his wife, living in the Patagonia for most of their life, that live in a shack. No running water, no cell service, no internet, no car, no credit cards, perhaps a basic savings account, with monthly income's a few hundred thousand pesos (on a good month). Guess what? They are worth over a million U.S. dollars. The property their shack is built on, the government gave them 40 or 50 years ago for free (mostly because the property was worthless), and they have struggled to ranch their entire life, is now worth over a million dollars. They sell their properties, and retire to a city to be near the grand kids. In some strange sense, they are worth more than a lot of Americans, Europeans, etc; on a net worth basis, they are worth more than a lot of people living in Santiago. However, the government has statistics on the people in Santiago. They don't have statistics on them.

The other case that comes to mind, is my own mother in law. To illustrate the roller coaster ride of income Chileans seem to go through in their life. She was at one point one of the top translators in the country. She was at the table for more than a decade, as multi-billion dollar deals were made, all across South America. At one point, she was making north of 10 million pesos a month. Of course she seemed to spend it faster than she made it, but she would have qualified in the top 1% of the income levels in the country.

She finally just retired this year. She is collecting a pension of like 450,000 pesos a month. Along the way however, in her wild spending days, bought a property on whim in the middle of a field. My wife had the good sense to put in her name to protect it. 20 years later, that is worth about half million dollars (or more). That property is on Punta de Lobos, Pichilemu and is now zoned urban, and a short walk to the famous waves.

That is another case of real estate assets not being captured correctly in the stats that are used. My wife has a bunch of property in her name, that belongs to other family members, that she has parked in her name over the years to protect it from creditors or just family members getting stupid.

Last year, one of these marketing firms, did a study, and determined something like only 10,000 Chileans owned more than one property. My wife and I fell out of our chairs laughing at that one. Pretty much everyone I know in Chile, if they own any property at all, also owns a second property. It is so common, I can not even imagine how lazy the guy conducting that study had to be to come up with that number. by the way, that was put down by the Central bank of Chile. There stability report, showed that to be false just in the number of people carrying two or more mortgages in Chile now.

Which get's us back to the international stats and reports. I went and dug out the World bank, and the IMF stats, that this credit suiza report says it used. Almost all the source stats, are from 2015-2016, and by the time they got published were probably a year or two out of date. So, they are basically using 5 year old stats, to criticize Chile. If the 7.6% average rise in wealth is correct per year (not even sure what that means), then the numbers given would be something like 38% higher than the base numbers; but, they are still reporting world bank GINI coefficients of 77% for inequality, compared to more recent ones I have seen of around 53% for Chile.

Yes, in other words, none of the number for Chile seem to square with each other; let alone practical observation. The GINI number is also notorious for things like distortions related to population density. You might be able to use it in say Santiago, but then it get's distorted when you use it in rural parts of Chile.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

User avatar
admin
Site Admin
Posts: 16690
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by admin » Sun Oct 21, 2018 9:31 am

Now, I also think the rich (top 1%), of Chile are far richer than the stats being reported.

Here is why.

I have talked about before, but is a good example, of just how wealthy, the wealthy are in Chile: Concha y Toro

It is a company, owned predominately by one of the wealthier families in Chile, but also until recently traded on the New York stock exchange. Market value of about 4 billion dollars, prior to them delisting from the U.S. markets.

They have land holdings, of thousands, or tens of thousands of prime agro real estate all over the World; and especially in Chile. They are talking about doing real estate development of some of their properties that they are never going to plant wine.

A lot of their property, purchased decades ago, sits in areas where the urban zones have grown up around their properties. They were reporting that their land was worth only $3,000 U.S. a hectare in Chile on average. Finding a property for $3,000 u.s. a hectar in Chile, even dessert and swamp land these days is a real trick. I had a look at where their properties are mostly located. They are between the Bio Bio river and La Serena, including a lot of prime land smack in the middle of the Santiago metro region. There is simply no way, there land holding average out to $3,000 U.S. per hectare. Even more, they have massive portfolio of water rights attached to their land.

My back of the napkin calculation, pegged their land holdings at more than 10 billion dollars in Chile. Never mind their property in California, Argentina, etc, and excluding property they are growing grapes on.

Besides causing me to immediately buy more Concha y Toro stock, it also got me thinking about how under reported the assets of Chilean companies are in Chile. Everything from the land that Fallebella is sitting on for future development, to mining companies with a portfolio of water and mining rights they have not exploited yet.

Point is, more of the big companies in Chile, are sitting on massive wealth that is under reported, and those companies are often majority owned by a few families (often through holding companies to holding companies). So, that new government wealth breakdown that says 1% of the households in Chile make more than 10 million pesos a month, is not even starting to capture the wealth of the wealthy.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

User avatar
admin
Site Admin
Posts: 16690
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by admin » Sun Oct 21, 2018 9:33 am

So, I am going to try to do some back of the napkin guestimates on the value of Chile.

I seen a stat a while back that pegged Chile's economy at being worth 1 trillion dollars. Not sure how they got that, but let's assume that is based on the skewed public information that is available. If we assume that everyone and everything is under reported real market value, then Chile is worth a lot more.

In fact, there is a sort of pattern forming, from the richest to the poorest in Chile, that seems to be under reporting their assets. We could say, probably pretty safely and conservatively say that everything is under valued by a factor of 2-3.

That puts Chile at a value of 2-3 trillion dollars.

However, more reasonable, is probably something like a factor of 10.

So, Chile is worth 10 trillion dollars. Even if we just look at it as GDP reported by the World bank, 2017, is 277 billion. Multiple by 10 years, yields an economy worth about 2.7 trillion and change. Again, assuming that 277 billion GDP number can even be trusted.

Perhaps, stretching it out, we could say the Chilean economy is worth really more like 20 times that, and still be relatively connected to reality. So, 20 trillion dollars.

By the way, all the international banks that try to lump Chile in as the fragile 5 or 10 or whatever, based on a debt to GDP ratios of whatever made up numbers they like to use, look stupid by any of those above numbers.

So, drum roll please. What are Chileans worth, mas o menos?

1,000,000,000,000 divided by 18 million, gets us about 56,000 U.S. per person. Pretty close to Credit suizas calculation, and thus makes me think that 1 trillion dollars is based on the skewed public stats. At least the sanity check on that base number, seems to work.

At 3 trillion, however, that works out to 166,660 per person.

At 10 trillion, 555,000 or so per person

At 20 trillion, just for fun, that get's us at 1,100,000 per person.

Remember these are total value of the Chilean economy. Not some sort of annual income average. Just if the assets were divided evenly. I would guess, the 3 trillion number is more reasonable; but, still potentially low for all sorts of reasons. I simply don't have sufficient information to even guess.

I am not sure, without some major government campaign to really evaluate assets in the country, we will never know.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

User avatar
admin
Site Admin
Posts: 16690
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by admin » Sun Oct 21, 2018 9:56 am

I think that 3 times under valued, is a fairly reasonable number, when I think about all the people I know in Chile with at least 166,000 U.S., or 100 million pesos, in assets. It is not hard to find people, even among the lower to working class, that have 100 million pesos in assets (either individually, or as a family). In fact, down right common to find families with more than 100 million peso in assets (e.g. how many people's houses alone are worth more than 100 million pesos in Chile).

I am not sure how to break those out to get at some sort of income inequality or wealth distribution, but it is somewhere more in the ball park, rather than just in the solar system, sort of number.

It seems to square well with my observations of spending habits, credit, investment, etc.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

User avatar
admin
Site Admin
Posts: 16690
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by admin » Sun Oct 21, 2018 10:13 am

but, if finding people from all parts of the economy with 100 million pesos in assets is so common, and we can take seriously any of the income inequality distribution stats at face value, that means the rich, are way richer than anyone is giving them credit for.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

mem
Rank: Chile Forum Citizen
Posts: 321
Joined: Tue Nov 24, 2015 11:18 am

Re: Chile Wealth, Inequality, and International rankings

Post by mem » Sun Oct 21, 2018 1:54 pm

Another interesting factor might be the average liquid savings versus assets. Cash under the mattress or in the bank/CD anything that could be converted into liquidity immediately. It is pretty abysmal in the US, I think average is under $1500 there. Really curious what it might be here given the auctions are showing people with at least 60mil liquid

mem
Rank: Chile Forum Citizen
Posts: 321
Joined: Tue Nov 24, 2015 11:18 am

Re: Chile Wealth, Inequality, and International rankings

Post by mem » Sun Oct 21, 2018 2:03 pm

mem wrote:
Sun Oct 21, 2018 1:54 pm
Another interesting factor might be the average liquid savings versus assets. Cash under the mattress or in the bank/CD anything that could be converted into liquidity immediately. It is pretty abysmal in the US, I think average is under $1500 there. Really curious what it might be here given the auctions are showing people with at least 60mil liquid
There is quite of data out there on various sectors of savings in chile, govt, corporate, household, etc, but so far it doesn't seem to be expressed in CLP or USD savings per household, more just a percentage rate of savings

https://www.ceicdata.com/en/indicator/c ... vings-rate

Britkid
Rank: Chile Forum Citizen
Posts: 1546
Joined: Wed Dec 05, 2012 6:59 pm
Location: Talagante area, Chile
Contact:

Re: Chile Wealth, Inequality, and International rankings

Post by Britkid » Sun Oct 21, 2018 4:13 pm

I suspect some of us (I include the admin and myself) have more in common in our lifestyles with Bezos or Bill Gates or Zuckerberg than with the poorest people in the earth. In strict financial terms that isn't so, but in terms of quality of life it probably is.

At least we can cross borders when we want (most of them), speak the truth, we have freedom, we never have no money to buy food or medicine. Abject poverty and oppression are really bad.

I mean, imagine I give you a coin and tell you to toss it. If it comes up heads, you will get many billions. If you comes up tails, I will take your passport and nationality and qualifications away and you will be magically transported to a random village or town in a very poor country. Do you toss that coin? Probably not. I wouldn't.
In 2014/2015 I blogged about my life in Chile. http://web.archive.org/web/201601121940 ... age_id=268

41southchile
Rank: Chile Forum Citizen
Posts: 325
Joined: Mon Jun 12, 2017 2:39 pm
Location: Lakes Region

Re: Chile Wealth, Inequality, and International rankings

Post by 41southchile » Sun Oct 21, 2018 9:23 pm

admin wrote:
Sun Oct 21, 2018 10:13 am
but, if finding people from all parts of the economy with 100 million pesos in assets is so common, and we can take seriously any of the income inequality distribution stats at face value, that means the rich, are way richer than anyone is giving them credit for.
Exactly, one of my staff, who used to be an alcoholic and would loose at least a week of his life lying in ditches in the countryside passed out drunk every month or so till the money ran out, then do some day labouring or find some jobs to get him through the the next few weeks, he did this up until about 5 or 6 years ago apparantly. Consequently his wife was about to leave him, in the end he found God and saw a doctor who helped him he is now evangelical and sober they have a 4 year old daughter, he is 48 but looks about 60. Anyway he told me all this one day while we were driving somewhere to pick up some machinery. He also told me that the place where him and his wife live, an absolute shack, which I thought was just a half hectare section, is actually 20 hectares which his wife and wifes only sister are splitting up now as both her parents have passed on so they get 10 hectares each, conservatively if it was just agricultural land there's 100 million at 10 million a hectare, now if they wanted to subdivide up they could easily get 15 million a parcela next week, with virtually no infrastructure investment their part, they could do 10 of them get 150 million less a few costs and still have 4 or 5 hectares to hand down to their daughter. Mas o menos. Oh and by the way him and his 4 brothers own about 80 hecates near Calbuco as well that they are inhereted, I did like the statisticians and didn't even bother calculating that. So yeah I understand exactly what your are saying admin, good posts.
In the Lakes Region Chile for 6 years. It looks like New Zealand in some ways, and is nearly at the bottom of the world too, but there the similarities end.

41southchile
Rank: Chile Forum Citizen
Posts: 325
Joined: Mon Jun 12, 2017 2:39 pm
Location: Lakes Region

Re: Chile Wealth, Inequality, and International rankings

Post by 41southchile » Sun Oct 21, 2018 10:08 pm

admin wrote:
Sun Oct 21, 2018 8:32 am

But, looking at that new income classification system, I can call bullshit on the usefulness of that for determining poverty. I have multiple examples of the old man and his wife, living in the Patagonia for most of their life, that live in a shack. No running water, no cell service, no internet, no car, no credit cards, perhaps a basic savings account, with monthly income's a few hundred thousand pesos (on a good month). Guess what? They are worth over a million U.S. dollars. The property their shack is built on, the government gave them 40 or 50 years ago for free (mostly because the property was worthless), and they have struggled to ranch their entire life, is now worth over a million dollars. They sell their properties, and retire to a city to be near the grand kids. In some strange sense, they are worth more than a lot of Americans, Europeans, etc; on a net worth basis, they are worth more than a lot of people living in Santiago. However, the government has statistics on the people in Santiago. They don't have statistics on them.

Many many cases like that, in fact a lot of the former socialist supporters, who got land under the reforms which were eventually stopped by the coup are now as capitialistic as you can get, I suppose that happens. This was according to my friend who I stayed with recently, he lives on the outskirts of San Fernando, its prime land you could say, he pointed accross the way at all the parcelas with crap shacks on them or houses that may have been ok in the day but have never had a lick of maintenace on them and said "see all those people over there, they are sitting on land that is worth 60 to 70 million pesos and will be more once the town boundry takes them in, which is going to happen.
Point is though, all that land being split up and given to more people has created a lot of new wealth in Chile, if you dont own real estate now, its hard. Its one theory why African americans are screwed in the USA because they were denied mortgages and credits and assistance to get property after WW2 when all the baby boomers got property by way of mortgages, the blacks (as they were called in those days) didnt, thats why there is such a big gap today for the next generations, those Africanamericans that aybe had a sympathetic bank manager or other ways and did manage to get on the property ladder are the ones that were help their kids and leverage off their equity to start businesses etc too, just like the whites, but they were definantely the minoroty. Shit, in Chile they didnt even need to get a mortgage they were just given land, the ones that have held on, are some of the new rich and have done very very well along the way and have been able to help the next generation get educated

https://en.wikipedia.org/wiki/Chilean_land_reform
In the Lakes Region Chile for 6 years. It looks like New Zealand in some ways, and is nearly at the bottom of the world too, but there the similarities end.

41southchile
Rank: Chile Forum Citizen
Posts: 325
Joined: Mon Jun 12, 2017 2:39 pm
Location: Lakes Region

Re: Chile Wealth, Inequality, and International rankings

Post by 41southchile » Sun Oct 21, 2018 10:25 pm

I read an interesting article yesterday in the economist, that said states and governments should sweat their assets more, but most of them dont even know their true value (in fact NZ was the only one that did a good job of that), most undervalued their assets and were not making as much money off them as they could, which could in turn be used to lower the tax burdon for their citizens, intersting article. Halaf the crap abandoned properties are owned by the state in Puerto Montt, then there is so much land all over the country owned by the state here that could definately be working harder and moving the economy more, I saw there was some plan under this government to start looking at the issue, Im not talking conservation land, but vast industrial railway land for example, that is never used, and so so many other things.
In the Lakes Region Chile for 6 years. It looks like New Zealand in some ways, and is nearly at the bottom of the world too, but there the similarities end.

Post Reply