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Chile swings left
FT editorial: ......But a slowing economy may soon dull the election victory
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Michelle Bachelet trounced her rivals in Chile’s presidential elections this Sunday. Winning 47 per cent of the vote, the left-leaning 62-year-old and former president(2006-2010) did not quite achieve the landslide she had hoped for; still, a comfortable victory at the December run-off now looks assured.
(Mrs.Bachelet’s main rival is Mrs. Evelyn Matthei of the centre-right camp who gained merely 25% of the vote. The fathers of the two candidates happened to be friends and neighbours both serving in the Chilean Air Force. Bachelet’s father, a supporter of Marxist president Allende, was arrested after Pinochet’s coup d’etat, before dying in prison. While Matthei’s father, a supporter of Pinochet, later became Chilean Air Force Commander. In 1990, Pinochet stepped down as military government president.)
After 25 years of democracy, and four years of centre-right government, Chile is swinging back to the left. As this shift is not part of any particular global or regional trend, it is worth asking why.
It is not because the economy has done badly under the outgoing centre-right government of Sebastián Piñera. Unemployment is at record lows, poverty has continued to fall and productivity has risen after years of decline. Nor, in a sign of Chile’s institutional maturity, has the political shift been accompanied by the hysteria that so often accompanies opposition wins in Latin American politics. Rather, it reflects a widespread desire in Chile for greater social equality amid the economic boom. That is quite understandable given that Chile is the most unequal member of the OECD.
Two promises stood out in Ms Bachelet’s campaign. One is to reform the constitution, which originates in the Pinochet era – although her coalition has not won a sufficient majority in Congress to do that. Another is to boost education spending by raising corporate taxes to 25 per cent. This measure is likely to pass but does not spell the end of the Chilean free-market model as it only brings rates up to OECD averages.
Indeed, Chile’s more pressing problems lie elsewhere. During Ms Bachelet’s first term from 2006 to 2010, China was booming, the price of copper – which accounts for a fifth of gross domestic product and almost two-thirds of exports – was rising, and Chilean employment was surging. But now the cycle is turning.
The economy is slowing, future Chinese growth is uncertain, copper prices are falling and rampant domestic demand has opened a worrying current account deficit equivalent to 3.5 per cent of GDP. The all-important mining sector is also slipping behind as lower ore quality, combined with rising wage and energy bills, has doubled production costs in just five years.
“Chile is starting a new cycle,” Ms Bachelet proclaimed on Sunday night. Quite true – if perhaps not quite as she meant or her voters understood. Addressing Chile’s looming potential economic problems, while also meeting high voter expectations, will be what defines her second term.
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