 Well, I was asked to focus my presentation on the case of Chile. We are now working here with Alan Rowe and Tony Addison in the project on extractive industries and the macroeconomic dimension of external shocks in the case of Chile. Here, well, Chile is just a little bit of a background. Now it's a $24,000 per capita income economy, which is the highest along with Argentina. Some years up, Chile is over Argentina. Years behind in the Latin American region is an OECD member country since 2010. But it's a country with quite the open in terms of export orientation. Therefore, subject to potentially adverse or positive effects of external shocks, copper is the main export commodity in Chile. And it's a country also that has been growing. It's a rapid transition from $5,000 to $6,000 in the late 80s to $24,000 now. But at the same time, it's a country with high indices of inequality, high genies for income and wealth. So it's a big story, but I won't go to the inequality part. So I will focus my presentation on a period of 40 years in terms of effects of economic shocks, both internal, induced by changes in policies and in economic development strategies, and external shocks related to changes in copper prices, changes in capital inflows, external demand, etc. Showing that the road to become a high middle income country cannot be that smooth. And this is affected by the shocks. Well, here I made a list of six main shocks that have affected the Chilean economy, the Chilean society in a broad sense, since the early 1970s. Well, in the period 1971-1973, Chile had a neo-socialist government with President Salvador Allende that was ousted in September of 1973 by a military coup. And he implemented policies of economic nationalization of the banks or the copper sector, agrarian reform, etc. It was a period of rapid distribution or attempt of distribution of income. And the country also suffered external destabilization politically, many coming from the U.S. President Nixon and Henry Kissinger were there and they liked the Chilean experiment and played some tricks that led to the military coup in September of that year. So that was a first, so to speak, shock. Perhaps this is beyond the standard definition of a shock. It's more a change in policies of a broader scope, but perhaps here it's considered as a shock. Then in the 70s there was a policy of shock treatment to reduce inflation in 1975-1976. In Chile, inflation was very high at the time, over 200% per year, and the military government, held by the group of Chicago economists, decided to undertake a very sharp squeeze on money supply, tried to balance the budget very quickly, and that was another shock that occurred in the 70s. I will show some of the results in the next slide. Then there was another shock, I would say, which was tied to very rapid financial liberalization coupled with a fixed exchange rate. That happened in the period 1978 to 1981. As part of the liberalization package undertook by the economic team of the Pinochet regime, they rapidly liberalized the financial system, probably not considering the issues that the previous presenter was putting forward here, and this coupled with a fixed exchange rate to reduce inflation. Then in the late 1990s, Chile suffered the effects of the external shocks related to the Asian and Russian crisis in 1997-98. Then 10 years later, the country also suffered the effects of the great financial crisis of 2008-09. Then in the last two or three years, since 2013 more or less, we are experiencing the effects of the end of the super cycle in copper prices, metals, and the downturn of the slowdown in growth in emerging economies. This is a set of six shocks, in a broad sense, over a 40-45 year period. I think they have shaped the Chilean economy along the way. Here there is a graph on growth and investment cycles in a period from 1960 to 2015. The green bar is GDP growth, and the purple bar is percentage change in investment, or investment growth could be negative. Then the yellow line with ups and downs is the real price of copper in dollar terms. Here we see, we can observe. Let me show it to you. Here we have the effects of the first one, as we know from this. Well, first, as you can see in other cycles, the volatility or the magnitude of the cycles in investment are much greater than the cycle in GDP, but both variables are closely correlated. Also, they are correlated with the real price of copper. Here we can show 72, 73 big drop in investment and a reduction in GDP, the first shock I mentioned. Then we have 1975 shock treatment, a decline in GDP, and a decline in investment. Then we have the big crisis of 82, 83 investment and growth. Then we have the recession of 1999 as a consequence of the Russian crisis and the East Asian crisis. Then we have the adjustment in 2009, again tied to external development like the great financial crisis. Then we have the adjustment of the last three years in Chile, which GDP has declined from around 5% average growth before that to 2%. Another feature that is worth mentioning here in this graph is that all the crises have been in general accompanied with a decline in the real price of copper. That was not the only cause and I have highlighted the different factors like shock treatment for macroeconomic purposes, financial crisis, the effect of external, externally driven factors, but the copper price has been always accompanying the cycles in general. Here I wanted to list the main recessions and depressions in the last 45 years in Chile tied to these economic shocks. Here we have a recession in 1972-73, a depression. I am using the word depression using this definition of a decline in GDP over 10% in at least one year. There are different definitions of depressions. Some people consider depression the number of years in which GDP is below the pre-recession year or pre-declined, but I used this other definition, GDP falling by more than 10%. So in 1975 there was a depression, GDP fell by 12%. Investment declined by 25% and unemployment increased to near 20%. Then we have the crisis of 1982-83. GDP again fell by 16% this time, more severe than the previous crisis. It collapsed by 35% and unemployment rose to over 25%. Then we have the two milder recessions of 1999 in which the decline in GDP was a little bit below 1%, 1.2% in 1999 and then the recession in 2009 in which it declined by 1.5%. So the declines in investment were less severe and the increases in unemployment also were more milder. Here let me say some things on this story of economic shocks, recessions, depressions and then recovery. First it's clear that the cycles of the 70s and the 80s were far more severe than the cycles of the 1990s and the 2000s. The economy became more flexible and they were more or less severe. Now the crisis of 1982-83 came with a very important financial component. There was a collapse in several important banks in Chile, a sharp rise in the share of non-performing loans in the portfolio of the banks. A very close relation between corporations and banks that were part of economic groups and that all contributed to a financial crisis that compounded the crisis coming from the real side of the economy. Then the other recessions were milder. As I mentioned, all the recessions and depressions over this 40-year period came along with a decline in the international price of copper. Well that's one set of conclusions that I would say. The other highlights the importance of the policy framework in Chile and in other countries. In the mid-80s, Chile put in place what was called the copper stabilization fund. Basically the fund accumulated resources when the spot price in copper was above a certain reference price and to be used in the case that there was a short fall of foreign exchange and avoiding a sharp adjustment in fiscal expenditure and overall economic activity. So there was a copper stabilization fund in place in the mid-80s. Then another policy innovation was a fiscal rule in which the government that was put in place in 2001 aimed at the government could expand fiscal expenditures only according to what was considered or is considered because the fiscal rule is still in place in Chile. A permanent increase in the price of copper, a permanent increase in the rate of potential GDP growth. The idea was or is that you adjust fiscal expenditure in a permanent way to changes in permanent revenues. Of course what is permanent in an uncertain world is an open question and the government has several expert commissions trying to forecast the future price of copper, the future rate of growth in GDP, etc. But the idea is to stabilize the behavior of expenditure, public expenditure, which is often considered a main factor driving economic cycles. In turn revenues are tied to copper and growth. And then in 2006 the government approved what was called a fiscal responsibility law and changed the name and made some other adjustment to the copper stabilization fund and created the economic and social stabilization fund. Well all these fiscal macroeconomic policies are credited to have reduced the severity of internal cycles following exogenous economic shocks. There is a question to what extent these funds have accumulated. Actually there are three funds. There is the economic and social stabilization fund which is the largest that has accumulated $16 billion. Then there is a pension reform fund that has accumulated $8 billion. And then there is a kind of great line of defense fund that has around $5 billion. So all together they add up to $30 billion which is roughly 10% of GDP. The question is are we overinsured or not in a country that has social needs, spending social needs, high inequality, etc. This is a trade-off that one has to consider in putting together this fund. But as the numbers and the previous graph has shown, the economic cycle became milder, smoother after these policy innovations were in place. Also helped Chile I think to deal with shocks the fact that it has for 15 years a flexible exchange rate regime. Before in the 1980s and the 1970s we had either a fixed exchange rate or a bond for the exchange rate. And that made real economic activity burn more of the cost of adjusting to shocks. Well now we are living in a slowdown as I mentioned tied to lower copper prices and also internal reforms of the current government that is trying to change the structure of labor legislation, reform the education sector, there was a tax reform, etc. And some people, some analysts blame these internal reforms for part of the slowdown in investment because the private sector doesn't like to match these policies. But it's an open discussion. Well, this could be my presentation. Basically I wanted to take a longer view of the effects of the economic and policy shocks induced and see how the Chilean economy has adjusted to that and what's the role of policy innovations in trying to make the effects of those shocks less severe. Thank you very much.