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Bachelet Needs to Stop the Bleeding Now

By: Contributor - Sep 23, 2015, 8:20 am
Chile must overcome the government's trust problem to return to a path of sustainable growth
Chile must overcome the government’s trust problem to return to a path of sustainable growth. (Runrun.es)

EspañolBy Cecilia Fernández and Daniel Birrell

The crumbling approval ratings of Chilean President Michelle Bachelet and her administration suggest there will be a new alignment of political parties (and candidates) for the 2017 primaries.

However, presidential hopefuls from the two largest political coalitions, the New Majority and the Alliance  — or whatever they might call themselves by then — frequently praise Bachelet’s mantra: Chile needs reforms.

Some conservative politicians have even rushed to support Bachelet’s proposals, arguing that they just need better planning and implementation. In other words, the problem is not the recipe but rather the chef.

What is troubling is that the Chilean government is showing clear signs that usually precede populism. Even though Bachelet has conceded that her administration won’t be able to roll out the reforms as intended — what she has dubbed “realism without compromises” — traces of the classic populist trail that drive countries to fiscal catastrophe and bad relations with their neighbors are emerging.

The Importance of Macroeconomics

Chile’s dependence on commodity prices, such as copper, aggravates the economy’s ups and downs — and will continue to do so for many years to come.

Lean times are inevitable. They will keep the country from supporting a welfare state that, in theory, was designed to reach fiscal balance during the so-called commodities super cycle.

The Chilean government has turned its back on the tradition of strong macroeconomics that prevailed since the 1980s under every administration. In addition, for better or worse, Chilean officials have relaxed their controls on public spending and infrastructure projects. The capital’s public transportation system, Transantiago, is a prime example of bad practices.

Rates of investment in the Chilean economy show “the worst numbers in the last three decades,” according to a report released by the Central Bank earlier this year.

[adrotate group=”8″]Government officials have tried to blamed it on the turmoil of international markets, but even their own publication shows that the economic actors’ lack of confidence began to play a larger role during the second half of 2014.

Such has been the disappointment with Bachelet’s administration that it has not only scared away investors, the flood of reforms also rendered the opposition incapable of stepping forward with alternatives.

Crisis of Confidence

Chile’s main problem is neither an adverse international scenario nor a bad administration. It is rather a deep crisis of trust in the political system. Chileans don’t believe their party leaders, congressmen, judges, or government officials in general anymore.

They doubt the efficiency of police officers and the ethics of big firms and business leaders; they question the quality of state-run health care and the legitimacy of the private alternatives. Chileans no longer think their social-security system is sustainable, nor that they get quality public education.

Even the previously well-esteemed tax agency is now considered a tool for political vendettas.

In the eyes of many Chileans, making money is a suspicious activity. They question private property in water, electricity, and mining enterprises. Chileans openly debate the legitimacy of the rule of law and whether the Araucanía region really belongs to Chile.

It doesn’t matter who will succeed Bachelet. The current crisis leaves little room for mistakes and weak, unfocused leaders.

Chile Needs Sensible Leaders

An unexpected legacy from this government is the return of Chile’s famous three-party system — right, left, and center — thanks to a new electoral law that promotes fragmentation. The resulting ephemeral majorities in Congress will make it harder to move away from a strong presidential system.

This means it’s unlikely that liberals will have enough votes to put the emphasis back on personal responsibility and private entrepreneurship. However, it is worth speaking up, even if we lose the election, because there will come a time for such ideas.

We need a local Churchill who dares to say “I have nothing to offer but blood, toil, tears, and sweat,” and leads the effort to make Chile a star of the developing world again.

There is room for reform in Chile, even a comprehensive one, that leaves a narrow margin for abuses. We need a plan aimed at the majority who has learned that prosperity does not come from government handouts.

We have no time for vague, grandiose promises à la Bachelet. Crises demand responsible reform. For instance, it might be a good time to advocate for a deep overhaul of the financial system by improving contracts and liberalizing interest rates.

If Bachelet’s campaign-finance reform advances in Congress, we can expect more sober candidates in 2017. I hope this will also be an opportunity to put forward a sound government plan focused on gradually recovering Chileans’ confidence.

Cecilia Fernández Taladriz runs a literature workshop, is a fashion designer, and painter. Daniel Birrell is a businessman and economist. They write opinion articles for several websites, and for their blog https://fernandezcecilia.wordpress.com.

Translated by Adam Dubove.