Walter Molano | Parallel worlds

In many ways, Chile and Hong Kong are as different as night and day. Chile is a Spanish-speaking Roman Catholic country, with an extended landmass in South America. Hong Kong is a small Cantonese-speaking outpost on the fringe of mainland China.

Yet, in many ways, they are very similar. Not only are their skylines dominated by Cesar Pelli-designed skyscrapers, they are both paradigms of economic development. Chile is the undisputed economic leader of Latin America. It is has the highest per capita income of South America. Meanwhile, Hong Kong sports the second-highest per capita income in Asia, excluding Brunei and Macau.

They are both known for their entrepreneurial spirit. Chilean retailers dominate the continent. Their investors hold strategic stakes in key industries. Chilean banks and financial companies are important players across Latin America. Hong Kong is Asia’s financial capital, with some of the most important banks, asset managers and hedge funds. It is one of the most important ports in the world, and it has long served as the gateway to mainland China.

Both countries are chocked with stories of rags to riches, providing enormous opportunities to those who are willing to work hard. They have leading universities, and brag some of the best infrastructure in their respective regions. So, why are their students so frustrated, and why are their train stations going up in flames?

The recent riots in both cities were ignited by seeming non-events. The infamous extradition law that sparked the Hong Kong protests was actually a local initiative. The increase in subway fares was in line with inflation. Moreover, despite having prices that often rival London’s and New York’s, Santiago’s metro fares remain relatively cheap. Therefore, what was the rub?

Another feature both places share is an immense income gap. Despite its small population, Chile has a disproportionate amount of billionaires, while Hong Kong has one of the highest concentrations of billionaires in the world. Their presence dramatically skews the per capita income numbers.

While most business people are familiar with the rarified Santiago neighbourhoods of Las Condes and Providencia, the rest of the country often looks more like Bolivia. Likewise, the expensive shops of Central and Admiralty have nothing to do with the squalid alleyways of Sham Shui Po and Kwun Tung. Moreover, it is becoming very apparent to the youth in both places that the days of striking it rich are quickly fading away.

The two places also share the ability to profit from the ascendency of China during the last 20 years. Sitting on opposite sides of the Pacific Basin, they benefited from the geometric increase in Chinese GDP and prosperity. Chile was the first Latin American country to take China on as its main trading partner, providing it with the commodities, such as copper, lumber and nitrates, needed to feed its ravenous industrial appetite. At the same time, Hong Kong became China’s main service provider. Yet, the Chinese miracle is quickly fading away, as the country joins the ranks of middle-income countries.

Burdened by its negative population growth rate, China’s steady state GDP growth rate will soon rival Japan’s. This is making life progressively harder for the aspiring youth of Chile and Hong Kong. Ironically, both youths lashed out at the same thing – their respective subway systems.

Chile’s Metro and Hong Kong’s MTR are both symbols of national pride. They represent their country’s wealth, efficiency and modernity. Perhaps this is the reason why the youth decided to turn their fury on them.

In the Brazilian classic movie, Central Station, Walter Salles constantly interjects images of trains. Many scenes take place on trains, or there are trains moving in the background. In an interview, he said that he used them to represent a nation that was on the move or in motion. It could be that the youth in Chile and Hong Kong no longer see an opportunity to move to a better form of life. Therefore, they decided to burn down the train stations.

Whatever is the case, it is clear that a sense of frustration is growing across the globe. You could blame it on China, or it could be the case that the younger generation perceives a situation where the previous generation has squandered everything. This could be in the form of the environment, government debt or broken pension systems.

A sense of generational frustration is spreading around the globe, similar to what was last seen in 1968. Therefore, the unrest in Chile and Hong Kong may not be an aberration; it may be the tip of a much larger iceberg.

Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.wmolano@bcpsecurities.com