Bachelet Up At Bat Again

By Alex Botting

The recent reelection of Chilean President Michelle Bachelet to a second, non-consecutive term reflects the hope that economic development in that country will do more to address issues of income inequality.

Chile’s path to economic development has given rise to the notion that it is more of a country club than a country, with income inequality registering as the highest among OECD countries – a collection of nations composed of 34 ‘developed’ countries whose mission is to “promote the well-being of [their] citizens.” Bachelet’s reelection may do much to change this reality but, in doing so, she should be careful of frightening the international investors and trading partners who have helped to facilitate Chile’s economic ascent.

In a continent which has witnessed its fair share of civil wars, protests, and extreme ideological shifts in recent decades, Chile has been the proverbial “elder statesman” of Latin America – combining measured policy adjustments with adherence to the nation’s political, legal, and economic institutions.

It’s a formula that has paid significant dividends for the Chilean people, with income per person (PPP) registering as the highest in Latin America, at $22,352, and the percentage of Chileans living in poverty having dropped significantly in 2011.

But the passive nature of Chilean politics has been uprooted in the latter half of former President Sebastian Piñera’s term, with Chileans taking to the streets for mass protests, demanding policies such as high-quality free education, improved worker conditions, and lower gas prices.

The roots of the protests are far deeper, serving as a challenge to Chile’s concentration of wealth among the “country club” elite. And lest people think they are merely symbolic of a loud, discontented minority, it’s worth noting that well over half the population supports the protestors.

It seems that the Chilean people have found their voice.

With this in mind, it’s unsurprising that left-of-center Bachelet has returned to power on a platform that includes a government takeover of the education system, tax increases on corporations, and major changes to the country’s constitution – particularly those that limit the ability of politicians to change the country’s neoliberal economic policies.

Bachelet’s first term, from 2006-2010 – and those of most presidents since 1990 – was characterized by the need to compromise to advance legislation. This has been the bedrock of Chile’s stable policy environment since the end of military rule, and enabled her to leave office with an astounding 84% approval rating.

Conversely, she enters her second term needing to win over only two sympathetic independents in the Chamber (lower house), and one in the Senate (upper house) to advance her education reforms. Other reforms will need a broader consensus, but one which she should be capable of delivering after a sweeping victory on December 15.

For Chile’s sake and her own, Bachelet should remember that great power confers great responsibility.

With popular protests very much en vogue, there is a temptation to yield to populism, if only to keep the protestors on her side. But she should be mindful that the neoliberal economic policies which are being challenged have underpinned a rapid improvement in the lives of Chile’s middle class, and a decline in the country’s poverty rate.

This progress can all too easily be reversed.

Widespread public protests, an increase in corporation tax, and significant changes to the constitution could rapidly undermine trust in Latin America’s “elder statesman” and roll back decades of economic progress.

Should Chileans need proof of the potential effect of capital flight, they need only look to their easterly neighbor, Argentina, whose unstable policy environment has left it on the brink of its seventh debt default.

There is no doubt that education reforms in Chile are necessary, and in the country’s long-term interest. But Bachelet should refrain from the kind of populist rhetoric and broad economic changes which could frighten investors and trading partners.

For better or worse, these issues are likely to define the success of Bachelet’s second term. If she navigates them successfully, she will rightly retain her reputation as a trusted reformer, both in Chile and abroad.

If not, Chileans may look back with regret on the glory days of unequal prosperity. 



Alexander Botting is a senior international consultant to governments and commercial entities in Europe, Eurasia, and Central Asia.

[Photo courtesy of Comando Michelle Bachelet]

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