Monday, January 20, 2020

OPINION AND ANALYSIS | 09-11-2019 11:50

Putting Chile’s protest crisis in context

In Chile a pro-market approach has never hinged on the electoral result – when the right loses an election, the country is assured of a broadly similar set of fiscal, monetary, trade and other economic policies.

On an extremely important anniversary in world history (30 years today since the fall of the Berlin Wall – the 9/11 of the European calendar) this “Global Perspectives” series on Argentina’s relations with the outside world is set to continue after a fortnight’s interruption for the elections.

But how? Even if president-elect Alberto Fernández has been considerably more loquacious about other countries than (say) his economic plans for his own, with his lengthy visit to Mexico, it would be premature to speak of any foreign policy in place with not even the minister designated. In these five weekends before the inauguration we will therefore look elsewhere in the region – at the recent trouble-spots of Chile, Bolivia, Ecuador and Peru and at Uruguay following its November 24 run-off, leaving the heavyweights of Brazil and Mexico for future definitions once the next government is installed. Argentine reactions and comparisons will be included when pertinent but are not essential – these countries are news in their own right, after all.

Let us start today with Chile whose problems must surely be common knowledge – even sports fans oblivious of politics will have noticed the change of Libertadores Cup final venue. These problems first need to be placed in their Chilean context.

With the highly polarised elections here a recent memory, perhaps the first point to make would be the striking continuity of economic policy across the Andes over the last three decades. Chile is not unique in the region in this respect (Peru has also maintained continuity with all stripes of government while Ecuador has stayed dollarised all this century, under various presidencies) but it does contrast with here where Mauricio Macri could convincingly present himself as the only real alternative to populism (otherwise he would have come nowhere near 40 percent in the current economic crisis).

But in Chile a pro-market approach has never hinged on the electoral result – when the right loses an election (as it has six times out of eight since Chile’s return to democracy in 1990), the country is assured of a broadly similar set of fiscal, monetary, trade and other economic policies (one reason why frustration took to the streets). Thus even if the current President Sebastián Piñera responds to the right, today’s Chile would be more accurately described as a centre-left creation – for pro-market structural reforms to take root they perhaps need to start from the left (as was the case with Australia’s Labor Party as from 1984).

A central point of these policies is an open economy geared to export-led growth. With under 19 million people a protected domestic market is even less of an option for Chile than Argentina with 45 million. This quintessentially Southern Cone country does not belong to the Mercosur quite simply because the trade bloc’s Common External Tariff averaging around 20 percent is far too high for Chilean criteria.

Instead Chile has signed no less than 26 free trade agreements with common markets and countries housing almost 70 percent of world population. Chile thus enjoys a bigger trade volume than Argentina with less than half its population – US$132 billion (including exports of US$70 billion) amounting to almost half the economy, as against around 20 percent for Argentina and contributing heavily to a per capita income of over US$15,000, (US$23,000 in purchasing-power parities, according to the World Bank). If Argentina has fallen from 10 percent below the poverty line to almost 40 percent in the last four decades, it would not be too much exaggeration to say that Chile has moved in the opposite direction.

If Chile has been torn by social unrest for over a month now, this might look like what a former British prime minister Edward Heath called “the problems of success.” What began as a four-percent hike in subway fares resisted by a few hundred students (themselves exempt from the increase) mushroomed into a mass demonstration of around a million people in Santiago on the eve of our elections (leading to some lively conspiracy theories here).

A reaction absurdly out of any proportion to this modest percentage until one also looks at the price of the Metro underground fare – the equivalent of 70 pesos for a subway token here. If relative prices are in continual disarray here, the Chilean cost of living is out of kilter along different lines. The costs of education and health services are high – with the former provoking students, historically a key catalyst for social unrest – while pensions (with a floor of some US$120) are at levels towards which Argentine retirement benefits might soon be converging.

Here there would seem to be a “problem of success” insofar as rapid growth has caused the private sector to outstrip the public, thus creating an imbalance which undermines the mixed economy. This disparity between the cost of some items and the incomes of certain sectors is probably more responsible for Chilean discontent than a more general inequality which is pretty universal in today’s world. This would explain why as much or more of the unrest has come from middle-class sectors than the poorest, as would be the case if social inequality were the only issue.

Although the mass protests of a fortnight ago have not been repeated on the same scale, Piñera has plunged as low as 13 percent in the opinion polls, which raises the question of whether he is not as lame a duck as his counterpart Macri across the Andes when only 20 months into his second term. Perhaps but if Mario Vargas Llosa has compared Chile’s protest movement to the gilets jaunes in France, French President Emmanuel Macron’s popularity ratings sank as low as 21 percent during two brief months in late 2018 when around three-quarters of France empathised with the populist groundswell – then the French middle classes wearied of the disruption and destruction, giving back its old meaning to the word “bourgeois.”

This history might or might not repeat itself in Chile, depending on whether or not this wake-up call triggers some real progress towards a more inclusive society – just as democracy is more than voting every few years, so creating an inclusive society goes beyond bringing people above the poverty line.

Chile’s experience should teach us that, contrary to what one might think in Argentina today, problems are not limited to countries undergoing a divisive election campaign, a transitional period between governments or an economic crisis. And also that each country is different – Chile is definitely not Venezuela but nor is it Bolivia, Ecuador, Peru or Uruguay, as we shall see in the following columns.

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Michael Soltys

Michael Soltys

Michael Soltys, who first entered the Buenos Aires Herald in 1983, held various editorial posts at the newspaper from 1990 and was the lead writer of the publication’s editorials from 1987 until 2017.

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