The relative importance of the construction sector has declined significantly since the early 1970s. In 1970 the construction share of GDP was almost 8 percent, but by 1992 it had fallen to 6 percent. This trend is largely the result of a dramatic decline in the public sector's construction activities. Whereas in 1970 the public sector was responsible for over 30 percent of the total square meters constructed, in 1991 this portion had been reduced to 3.1 percent. This trend is partially reflected in a decline in the quality of the infrastructure. In order to maintain its pace of growth, Chile must reverse this trend.

The total construction area grew during the 1987-91 period at a healthy pace of 12.5 percent per annum. However, all of this increase is attributable to the private sector. During this period, the yearly area constructed by the public sector declined. The sector enjoyed a robust growth of 10 percent in 1992 as a result of an increase in housing starts and other construction projects.

A significant percentage of private-sector construction is financed by the government. In fact, one of the most important innovations of the military regime was that the state's role as direct producer was greatly reduced. Since the late 1970s, the overwhelming majority of public works have been executed by private-sector firms under government contract. A similar major structural reform has taken place in housing for people with low income. Although in the 1960s and early 1970s houses in this sector were constructed by government-owned firms, in the early 1990s they were being built by private firms and sold to people with low incomes through an elaborate subsidy system.

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Source: U.S. Library of Congress