GDP is, of course an odd measure for the impact of the Earthquake. Yes Chile will take a hit to its national income. It will be forced to spend just when it has less revenue, and that is likely to mean borrowing. But the GDP equation will count all economic activity - including rebuilding - as an economic benefit. Despite a huge destruction of capital the replacement of that capital will appear like a good thing.In terms of opportunity cost, of course it isn't. Nobody needs an 8.8 magnitude earthquake and in competitive terms the quake is likely to set Chile back at least five, and possibly even ten years.
There will be internal displacement and migration and there will probably be political ramifications as well. Fortunately incoming President, billionaire Sebastian Pinara will have a clear mandate for emergency leadership when he takes power in nine days time. With chaos on the streets it will be easy to exercise more force than perhaps left wing incumbent Michelle Bachellet would choose.
On paper Chile's army is poorly organised for this sort of operation. It's just spent a fortune on 120 old German Leopard 2's but only has about 600 trucks. For a force with 45,000 soldiers that is pretty hopeless. Worse, a large part of the national defence administration is now buried in the rubble in Concepcion.
Chile's Navy is similarly militaristic. Its two French light ferry ships and one US landing ship tank are wildly outnumbered by the frigates and submarines in its line of battle. Equally sad the airforce has 10 Iroquois, 6 small transports (CASA C212) and 3, count them, 3 C-130s. Most of the money goes on F-16s and combat aircraft. The Chileans have been annoying the Americans by kicking the tyres of Mi-17s, which as the Thais have pointed out are about ten times better value for money than a Blackhawk. The Navy and Airforce have another 35,000 personnel between them.
Chile is 4,300 kilometres long and on average 175 kilometres wide. Chile's mountainous border to the East is mostly shared with Argentina, with Northern borders with Peru and Bolivia. Since the collapse of the fascist regimes in both Argentina and Chile relations between the two countries have improved markedly and there is now a clear spirit of cooperation. Both Peru and Bolivia are potential sources of friction but neither nation is strong enough economically to sustain a war with Chile.
In short Chile does have a need for a defence force that can deal with insurgency style conflicts and fake "guerilla" movements sponsored by grumpy elements among its Northern neighbours. For this it needs professional infantry, a much better airforce and mechanisation better suited to these sorts of operations.
But while Chile has had diplomatic stoushes in the past, under an all-hazards defence framework it is impossible to overlook the 28 major earthquakes it has had in the past 100 years. Two of these are among the top five largest earthquakes in recorded history.
Given a 20-year capital expenditure cycle it is almost certain that the Chilean armed forces will have to contend with a very serious earthquake five times in that cycle. Sure as God made little apples these earthquakes will require the assistance of agencies beyond the Carabineros, i.e the rest of the Defence Ministry.
The military establishment cannot prevent an earthquake but it can reduce the opportunity cost of an earthquake by establishing law and order, supply and returning critical services so that civilian operations can resume as fast as possible. This would seem to be a natural task for the Chilean military.
Were I an incoming Chilean president with a business bent this is what I would be asking myself. "We employ 110,000 personnel in the Defence force. That's neally 12% of the population of Concepcion. Did our people really get their money's worth from this vast collection of manpower and machinery after the earthquake? Or are these just a bunch of strutters waiting to plot another coup or bomb a bunch of no-hopers from up North?"
And I think what I'd be wanting to see is much less emphasis on buying second hand big guns and a lot more on rapid deployment, field engineering and logistics, and low intensity warfare training and management. I would definitely be wanting to hear about a volunteer civil defence command using military budget.
I'd also think about different equipment. Chile's biggest problem is the United States. It is notable that Chile is spending US$900 million on 46 F-16s while Peru is spending half that on the better Mig-29. Chile looked at the HAL Dhruv which is an excellent value light helicopter but ended up with the Bell 212 instead. Essentially Chile has to tell the US where to stick its military bullying.
Lots more logistics trucks like the Indian TATA LPTA 1623 7.5 tonne truck. Cheap. Rugged, Used to high altitudes and temperature extremes. This is no piece of German perfection but when you need numbers it will do.
And I'd be looking pretty hard at the South African RG-35 for armoured patrol. It can carry 15 tonnes or 15 troops. It's mean enough to deal with both insurgents and rioters, but not a full-on combat vehicle.
All of these systems have dual use. i.e they can be used for civilian emergencies as well as military ones. The helicopters and the trucks can provide aid, fire fighting, water, and many more capabilities besides.