The Rise and Decline of Chile’s Reform Agenda
By Roland Benedikter, Katja Siepmann, Miguel Zlosilo, Senior Research Fellows at the Council on Hemispheric Affairs
This is an excerpt of this article. To download the full PDF version of this article, click here.
This article discusses the state and perspectives of Chile’s reform program half-way through the second mandate of President Michelle Bachelet (Bachelet II). After raising high hopes and promising encompassing “policies that change cultures” during her election campaign in 2013, Bachelet’s agenda is in crisis and partly stuck due to the interconnection of home-made errors with a changing international environment that has slowed the Chilean economy down. The question is whether in the remaining years of her second office – until March 2018 – Bachelet will be able to realize at least part of her ambitious reform agenda which in August 2015 she re-calibrated under growing political pressure towards a more modest “realism without renouncement”.
After a first presidency from 2006 until 2010, Chile’s current president Michelle Bachelet (born 1951) of the center-left coalition New Majority (Nueva Mayoría) was re-elected in December 2013 for a second term in office from March 2014 until March 2018. The hope of the majority of voters encompassed social, economic and political reforms in favor of the middle and lower classes, and in general better social balance and participation.
This hope is not a new political motive in the Andean nation. It was at the center of most general and presidential elections since at least the victory of Socialist Ricardo Lagos in 2000. Chile, the only member of the Organization for Economic Co-operation and Development from South America and role model for South America’s and the Global South’s development, is one of the most unequal nations on earth including not only wealth and income inequality but also education. That is, among other reasons, an effect of neoliberal policies implemented under dictator Augusto Pinochet (1915-2006, dictator from 1973-1990) and the subsequent governments, which managed the transition to democracy. In response, Bachelet vowed to enact multi-dimensional change so far-reaching and interdisciplinary in scope and extension that she called it a coordinated array of “policies that change cultures”. Overall, Bachelet promised to not only apply sectorial corrections, but to change the functional, institutional and constitutional basics of the nation in order to create a “new culture” – an attempt seen skeptically by many conservatives and moderates given Chile’s economic success of the past decades.
But after the first two years of her second term in office, despite some apparent achievements such as the (disputed) signing of the Trans-Pacific Partnership Agreement (TPP) on 5 October 2015 in Atlanta declared as “victory in defense of Chile’s interests” by the president, Bachelet’s ambitious reform agenda seems to be compromised, if not seriously damaged. The crisis of Chile’s reform project half-way through is on the light of the day, forcing the president to re-calibrate her goals and ambitions; and the reasons are multiple. The resulting threefold question is:
1. If Bachelet’s reduced agenda will be realizable until the end of her mandate in March 2018;
2. If “policies that change cultures” within (relatively) short timeframes are possible in a nation that is still in many ways an “unfinished democracy”; – and
3. If they are possible at all in a political and economic sphere that due to increasing interconnections and globalization seems in some ways to move slower than in times of national decision-making and development
The Popularity Crisis of Michelle Bachelet – and of Chilean Politics
In December 2013 Bachelet won the presidential election with 62 percent of the vote, promising a far-reaching reform program that vowed to initiate a “new historical cycle” in the South American nation. Bachelet is not only the first female president of Chile, but also the first person to win the presidency for a second time in competitive elections since 1932. With her re-election it seemed that the people’s demand for structural change—especially in the education sector, as expressed since 2011 in the form of recurrent student mass protests—had shifted to the highest offices of the country.
However, after two years in office Bachelet has apparently lost good part of her popularity along with civic support for her reform program. According to the public opinion institute GFK Adimark Chile, Bachelet reached a historical disapproval rating of 72 percent in August 2015, which exceeds the population’s disenchantment with former President Sebastián Piñera during the worst moment of the student protests in August 2011 (68 percent), and thus represents the poorest result since 2006 when the collection of monthly approval data began. In August 2015 Bachelet’s center-leftist party coalition New Majority was approved of by a mere 16 percent, and ironically, the only group rating worse was the center-right opposition Alliance for Chile (Alianza por Chile) with 15 percent. It is remarkable that the two leading alliances of left and right, the biggest of the nation that in their dialectics define national politics, achieve only a combined 31 percent approval and thus leave the remaining 69 percent to disapproval and a few other politically irrelevant and highly fractured parties, signaling a real crisis of the political class. It could turn out to point toward a lingering failure of the political system and of “big” policies in Chile. What has happened?
The Dangers of Simultaneous Multi-Sectoral Change and Intertwined Reforms
The gradual downturn of Bachelet’s approval rating started as early as fall 2014, as Chile’s four leading national surveys unanimously indicate. Her popularity reached a critical point in September/October 2014 when for the first time in her second term more people disapproved of the way she was running the government (47 percent) than approved (45 percent). Despite the economic downturn, which commenced during the last year of Piñera’s administration, Bachelet was able to push through a tax reform in 2014 while drawing ruthless criticism from her opponents. In October 2014 Bachelet stated:
“There’s an old saying that it’s never a good time for tax reform because either the economy is doing great, so why would it need a tax reform, or else the economy is doing bad, so how can you think of tax reform now?”
The purpose of the reform was the implementation of a new tax system that would no longer guarantee exaggerated benefits to companies (as the existing system had done) and to collect three percentage points of GDP to finance educational reforms that aim to make education free to all. Since the tax reform has yet to be implemented, its real fiscal effectiveness remains to be seen. While the proposal for educational reform was still approved by 58 percent of citizens in May 2014, this number had slipped back to 39 percent by August 2015. Interestingly, 68 percent of Chileans in June 2015 still supported the general demands of the student protest movement, i.e. free education (theoretically also the main goal of Bachelet’s educational reform), while only 34 percent approved of the conduct of the ongoing student protests and as few as 14 percent agreed with the way the government was handling the conflict.
Drivers of Inequality: Education and Labor
At present, the majority of Chileans still believe that “bad education” is the country’s main driver of inequality. They argue that reducing inequality and improving the educational system should be among the top priorities of Chile’s government within the next 10 years. Thus, access to and quality of education remain the central topics of public discussion. But Chile’s citizens seem to disagree with the content of reforms that pretend to solve the problem of educational inequality in order to attack the roots of social (and thus political) inequality.
A similar process can be observed with the reform of labor, which has been on the negotiation table since the beginning of 2015. While in January 2015 Bachelet’s proposal for labor reform garnered 53 percent approval, only 31 percent remained by August 2015. Well aware of the inherent risks of rapid change and the social psychological effect of uncertainty, Bachelet struck an anticipatory note in an October 2014 interview with Spanish newspaper El País:
“Now a new period has begun that preserves all the good things from the past, changes what didn’t work, and addresses new tasks. Sometimes you have to conduct policies that change cultures and modify existing situations. It’s not about keeping everything the way it was, because progress would be impossible that way. But when change is effected, you need to give it enough time, or make it gradual to ensure that the process will not be dramatic.”
El País added:
“It is precisely a lack of sufficient time and the gradual introduction of government policies that Bachelet is being criticized for. She was a moderate during her first term and a radical populist during her second, her fiercest critics claim.”
Indeed, carrying out “policies that change cultures” is an ambitious plan, but it’s not such an unrealistic description of what would happen if, for example, Chile’s educational system would effectively become free of cost for everyone—given that it is currently the world’s most privatized and most expensive system in terms of per-capita income, and thus one of the country’s biggest cash cows for the richest parts of the population to the disadvantage of the poor and the middle class.
Money and Politics
At the beginning of 2015 the relationship between money and politics arrived squarely at the center of public discussion in Chile. This is because of the ongoing conflicts of interest, corruption scandals, and cases of subsidy fraud in Chile’s educational sector, and it also represents a more general problem at the interface between Chile’s government and the private sector. According to the Corruption Perceptions Index by the non-governmental organization Transparency International, Chile has long been considered a comparatively well-functioning democracy with one of the lowest corruption levels worldwide. In 2014, Chile was ranked 21st of the 174 countries examined. This not only made Chile formally the least corrupt country in South America, but even showed corruption in Chile to be less of an issue than in some European countries (for e.g. Austria 23rd, France 26th, Portugal 31st, Poland 35th, Spain 37th in the international ranking). But the February 2015 revelation of scandals involving both right and left wing parties changed civic perception, and led to a profound examination of the mechanisms at play between the private and public spheres. On March 10, 2015, Bachelet commented on the issue in these terms:
“We have seen some people using the power of their money to influence decisions of democracy, this is to say, decisions that affect us all. And we have seen some people in democratic and public offices using their influence to obtain personal advantages instead of serving the interests of the citizenry.”
Indeed, there were “some people” using their influence—including the son of Michelle Bachelet herself, Sebastián Dávalos, who was director of the Presidential Office of Socio-Cultural Affairs until the revelation that later became popularly known as the Caso Caval. Dávalos allegedly helped the export and management company Caval Limitada, which is co-owned by his wife Natalia Compagnon, to obtain a credit of more than $10 million USD from the Banco de Chile. The plan was to buy rural territory in Machalí, a commune and city in Cachapoal province in O’Higgins region, and to help the company to achieve changes in the Machalí development plan so as to transform the purchased property into an urban area, thus multiplying its value.
The credit was approved on December 16, 2013—one day after Michelle Bachelet’s second electoral triumph—in a personal meeting between Dávalos, Compagnon and Andronico Luksic, vice-president of the Banco de Chile and one of Chile’s wealthiest entrepreneurs. As Juan de Onis commented in Foreign Affairs:
“This disclosure badly damaged Bachelet’s self-styled image as a benign and motherly benefactor of the poor, far removed from the wiles of Chile’s wealthy upper class.”
Although Bachelet was, in the narrow sense, not personally involved in this scandal, many Chileans do not believe her public declarations of having not known anything about the “deal” between her son, her daughter-in-law, and Luksic. Be this as it may, the impact of the Caso Caval on Bachelet’s credibility was negative beyond question. After the revelations her approval rating fell steadily from the already low 39 percent in February 2015 to the historical low point of 24 percent in August 2015. While 56 percent still thought of Bachelet as a “credible person” in February 2015, this number had dipped back to 36 percent as of August. The February 2015 CADEM survey by Plaza Pública polled specifically on effect of the Caso Caval and concluded that 64 percent of respondents believed the case badly damaged Bachelet’s image, while 76 percent thought that Sebastián Dávalos used his influence as son of the President to obtain economic benefit.
To continue reading the full article, click here.
By Roland Benedikter, Katja Siepmann, Miguel Zlosilo, Senior Research Fellows at the Council on Hemispheric Affairs
Corresponding author: Roland Benedikter, Dott. lett., Dr. rer. pol., Dr. phil., Dr. phil., is Senior Research Fellow of the Council on Hemispheric Affairs Washington D.C, Research Professor of Multidisciplinary Political Analysis at the Willy Brandt Center of the University of Wroclaw/Breslau, Trustee of the Toynbee Prize Foundation Boston, and Full Member of the Club of Rome. Previously, he served as Research Affiliate 2009-13 at the Freeman Spogli Institute for International Studies, Stanford University, as Research Scholar 2009-15 at the Orfalea Center for Global and International Studies of the University of California at Santa Barbara – 2009-13 as the European Foundations Research Professor of Multidisciplinary Political Analysis in residence – and as Full Academic Fellow 2008-12 of the Potomac Institute for Policy Studies Washington DC (where he remains on the editorial board of the Institute’s journal STEPS). He was active for eight years (1995-2003) in European politics. He has written for Foreign Affairs, Harvard International Review (where he is on the Advisory board), Welttrends Berlin (where he is on the Scientific Board), The National Interest, Global Policy, Global Social Policy, New Global Studies, Goergetown Journal of International Affairs, Blätter für deutsche und internationale Politik, European Foreign Affairs Review and Challenge: The Magazine of Economic Affairs. He is co-author of two Pentagon and U.S. Joint Chiefs of Staff White Papers (Pentagon Press, February 2013 and April 2014) and of Ernst Ulrich von Weizsäcker’s Report to the Club of Rome 2003 and is a frequent commentator for the Italian national broadcast company Radiotelevisione Italiana (RAI), the German newspaper Die Welt Berlin and the Austrian newspaper Wiener Zeitung.
Katja Siepmann, MA, is a socio-political analyst who cooperates with the Social Research Institute “Opina” in Santiago de Chile. She is Senior Research Fellow of the Council on Hemispheric Affairs Washington D.C., Member of the German Council on Foreign Relations and has written for Foreign Affairs, Harvard International Review, and Challenge: The Magazine of Economic Affairs.
Miguel Zlosilo, MA, is Director of Analysis and Methodology at the Social Research Institute “Opina” in Santiago de Chile where he has lead responsibility for policy studies and public opinion polls carried out for national and international media, Chilean and Latin American enterprises, political parties, politicians, and the Chilean government.