Chile's car boom

Beyond urban sprawl there's an economic issue with Chile's car boom: crude oil is already Chile's biggest import, and an increasing reliance on gas could impact the country's trade balance.

• A version of this post ran on the author's blog. The views expressed are the author's own.

If there’s one thing that defines the Chilean national character, it’s a love for the countryside. That means that the first thing people do when they can afford it is buy a car. For country-dwellers, a car or truck helps make the rural lifestyle a bit more profitable, as taking crops to market in horse-drawn wagons is more quaint than efficient. For city folks, a car helps people to see the countryside on the weekend. But of course soon enough, a big portion of both country and city folks, once they own cars, become suburban folks. And once they are living in spread-out suburbs, they need another car, and another. It’s a feedback loop we’ve seen all over the world.

I don’t know exactly where Chile is in this process, or whether it’s already too late to halt the sprawl. What’s clear is that the feedback is accelerating. Check out [this graphic] from the national statistics office car report, released yesterday.

Yes, almost a million more cars on the road than six years earlier, an increase of 37 percent.

There is a lot to say about this fast-growing vehicle ownership. First, as I said, this means sprawl, most of which is going to be on some of the world’s best farmland. Lawns and golf courses will suck up water, as subdivisions will usually be able to outbid lettuce and avocado farms for water rights. That could even affect miners.

The growing car population also represents a growing population of people who will demand lower fuel taxes. If that goes through – and by the signature-gatherers I see on my block every day, I suspect it will – Chile fuel prices will drop, creating another incentive for vehicle ownership.

There’s a macroeconomic issue here too. Crude oil is already by far Chile’s biggest import, making up 8.7 percent of the country’s imports. If the 2010-2011 rate of change persists, the vehicle population will double over the next nine years. Chile’s economic success has been based in part on its trade balance, which often reaches $1 billion a month. I realize that not every car gets driven every day, but it’s well known that once you have a car, you tend to use it. So each car that goes into circulation is essentially a commitment to importing at least a few liters of fuel a week for 10 or 20 years. A million more cars is a big change. Here’s how Chile’s crude oil, diesel, and total fossil fuel imports have evolved over the last decade. The figures are in millions of US dollars, so the total fossil energy imports are already well over $1 billion a month [go to original post for graphic].

I estimated the 2012 figures by multiplying the first-quarter figures by a seasonal adjustment factor based on the first quarter’s average weight in annual numbers. I wouldn’t put too much stock in that estimate, but it shows that, at least, we shouldn’t expect the numbers to drop this year.

– Steven Bodzin is the Santiago, Chile correspondent for the Monitor. He also blogs at Setty's Notebook.