Americans Daron Acemoglu, James Robinson and Simon Johnson were awarded the Nobel Prize in Economic Sciences 2024, a prize awarded by the Royal Swedish Academy of Sciences. Their analyses on the importance of institutions for a country's prosperity earned them the prestigious laurel. These contributions have been enlightening about the impact that institutionality - or the lack of it - has on a country's capacity for growth.

With his book "Why Countries Fail: The Origins of Power, Prosperity, and Poverty," which became a bestseller, the book best seller in 2012, Acemoglu and Robinson became famous.

In it, they postulated a series of factors that contribute to the success or failure of nations and that such success or failure is determined -primarily- by the quality of their institutions, not only political but also economic, and that, in turn, the inclusive institutions inclusiveinstitutions, understood as those that foster the participation and well-being of a broad majority, lead to prosperity, while those that are extractive lead to poverty and failure, as they concentrate power and resources in a few hands.

In Chile, institution-building is an ongoing process.. Seen from the outside and in a regional context, Chile is seen as the country with the most solid institutional framework in all of Latin America. This is verifiable, for example, in rankings such as that of global competitiveness, in which our country occupies the highest position compared to others in the region. However, the 44th place it occupied this year is actually very low, considering that only 67 nations are included. In addition, since 2020 the country has been losing positions in this ranking.

So, are Chile's institutions really strong? Or, at least, are they strong enough to guarantee a positive and sustainable growth trajectory in the medium and long term to continue to aspire to be part - someday - of the team of the developed countries?

The truth is that, in light of the postulates of the 2024 Nobel Prizes in Economics, Chile would still be lacking a more inclusive institutional framework.

It is true that the debate has been opening up, even more so after the events of October 18, 2019, which evidenced the need to increase inclusion. But inclusion not understood only as the acceptance of diversity of race, gender, creed or political stance, but rather as the the need to generate opportunities and incentives for allwhere the entire social spectrum is embraced.

In James Robinson's own words, "in Chile there are still elements of oligarchy and that has to change because it is not consistent with a developed country design; everyone should have the same opportunities in, for example, education and thus make it possible to identify all kinds of talents in society.".

The International Monetary Fund (IMF) published its update of world economic projections. The document points out that -at a global level- there are still several structural factors that are weighing down economies or slowing down growth. These include an aging population and low productivity. The low growth projected for the world for the next decade is therefore a cause for concern.

So, in this environment of low global growth and with an institutional framework still in the process of formation, how does our country stand? According to the IMF, Chile will not grow more than 2.3% for the rest of the decade; growth that, although it is within the trend, shows a stagnation. The lack of progress in the required reforms could feed back the low growth and increase social discontent, favoring populist policies. It is therefore necessary to improve governance, which of course is achieved through institutions.

The achievement of Robinson and his friends has been nothing more than a reminder that institutions are key to development and welfare, and that their value is not measured in popularity polls, but rather -in reality- in GDP points.

Milene Rodriguez

Strategy and Investment Analyst