Vacation time in Chile
You can feel the air being sucked out of Santiago. January is running out of days, and by the first of February, this teeming capital city will feel empty, and it will be, well, habitable for about a month.
Santiago has too many people for it’s infrastructure, not enough streets for cars, buses and bicycles. Its air is still too polluted and full of allergens for anyone’s own good. And right now, it is hot and dry…it’s the time everyone who can, gets out of town.
The end of January coincides with the end of Chile’s legislative year, so chief vacationer, President Bachelet, after a quick trip to Costa Rica for a regional meeting of Latin American leaders, will head to her southern hideaway on one of Chile’s most beautiful and isolated lakes. Reports suggest she is heading out of town with a high degree of satisfaction with what she and her government have accomplished in her first year at the helm. Whether or not you agree with what she has done, admittedly she has kept most of her campaign promises by coaxing a long agenda of legislation through the Congress (parliament, they like to call it; it sounds more European).
First, she successfully reformed the tax code in favor of the income tax paying middle class, produced an energy sector plan that relies more heavily on renewable sources of energy (while the largest hydroelectric project in the Aysén región was being shelved for a myriad of reasons), took the first step in election reform that replaces the prior “binominal” election system with a more democratic proportional system, began a complex and game changing educational reform process (see prior posting on this blog), made adjustments to the antiterrorism law seen as prejudicial to minority groups like the Mapuches, took initial steps to legalize same sex marriage and to decriminalize certain types of abortion (impossible to even consider up to now in this socially conservative society highly influenced by a reticent Catholic church), and a draft labor law that strengthens unions and attempts to balance the political influence of labor with capital.
Next year she plans to proceed with the second phase of her educational reform that will return the public schools now run by the local Municipalities to the State’s Education Ministry and start the process of providing free tertiary education to all, dig into health sector reform, and identify a process to enact a new constitution rooted in democracy rather than the present constitution that originated in the dictatorship although subsequently amended and signed by the democratically elected President Ricardo Lagos.
One columnist recently suggested that in one year, assisted by a majority in both houses of congress, Bachelet has been able to “transfer power from the private sector to the State, from minorities to majorities, and from capital to labor.” All this in the country that, based upon a liberal free market economic model, has increased per capita GDP to about $20,000 becoming the first south American country to join the OECD group of developed economies, and has been able to reduce the percentage of their population in poverty from about 40% in 1990 to 8% in 2013, and those in extreme poverty from 13% to 2.5%.
But, Bachelet and her folks don’t hold “numbers” in very high regard (especially the ones that show a drop in her popularity over the past year). They are more concerned that in the 25 years in which poverty has diminished significantly, the distribution of wealth and political power in the country has remained constant, unacceptably unequal, although some indicators suggest a slight improvement in income distribution. While the President leads the rhetorical attack on “inequality”, the most egregious expression of inequality is the poverty entrapping between two and three million Chileans. Most people familiar with Chile’s socio-economic history admit that the impressive reduction of poverty is a result of a sustained period of high economic growth.
The IMF is projecting GDP growth in 2015 of 2.8% for Chile, even as the country is in the grip of the global economic slowdown. China has diminished commodity purchases including Chilean copper. Copper has reached about $2.50 per pound, the lowest per pound price since 2009 and well below the equilibrium price on which national accounts have been based. This growth, while low for Chile, can be compared to negative growth projected for Argentina (-1.3%) and Venezuela (-7.0%), lower levels of growth for Brazil (0.3% and the average for all Latin American countries (1.3%), and surpassed only by Peru (4.0%) and Colombia (3.8%).
If you listen to the President and her team talk about her agenda of redistributive reforms needed to reduce inequality in Chile, you have to wonder if she is paying enough attention to what it takes to return to the higher, more “normal” level of economic growth sustained over the past few years. One indication that she is, in fact, paying attention, is the early reversal of her intention to deemphasize Chile’s participation in the Pacific Alliance. Chile is committed to this alliance with Mexico, Peru, and Colombia, all countries that along with Chile have economies projected to grow in the short term contrary to their neighbors in the Mercosur economic group who are showing negative economic growth in the short term, notably Brazil and Argentina.
Many in Bachelet’s left of center camp are ideologically adverse to basic concepts of modern capitalism: free markets, respect for private property, profit, and seemingly even freedom of choice. Some are untiring in their attacks on the entrepreneurial class, basically the private sector. The idea that anyone who has become successful in banking, industry, services, and retail have done so at the expense of everyone else, and probably through illegal or immoral means, is surprisingly pervasive in Chile. Unfortunately, there are enough cases of just this type of private sector abuse and criminality to suggest the system needs considerable cleaning up.
The opposition parties, who supported the prior presidency of Sebastián Piñera, are doing little to convince the Chilean public that they deserve support. They are caught up in an election financing scandal, and during the first year of Bachelet’s term took a page from the “Nay-Saying” Republicans in the US and have yet to show that they provide a legitimate alternative to Bachelet’s agenda. Nor are they making much progress towards positioning themselves to field viable candidates in the next elections.
All of this seems to support something a Chilean friend told me recently, that “Times have changed in Chile, and so have the major actors.” This surely is true, and if you look closer, so much is going on. Even with all the change Bachelet’s reform packages seem to entail, the country is not in crisis mode. There are no demonstrations in the streets, but then again, it is vacation time. The government is proceeding to expand Santiago’s international airport to the tune of US$ 630 million. Why? Because Spaniards and Argentines and Brazilians and Colombians continue to emigrate in increasing numbers to Chile. Tourism is increasing, and with it new jobs and foreign exchange. Peruvians increasingly clean Chileans homes, take care of their children, and feed them with causa and cebiche in some of the best restaurants in Santiago.
Major infrastructure investments are going forward; the studies for the bridge between the mainland and the Grand Island of Chiloé have begun, a new regular ferry has been announced to provide vehicular and passenger transportation between Puerto Yungay on the Carretera Austral near Caleta Tortel, and Puerto Natales, finally bridging the last 770 kilometers that now will make it possible to drive from Arica in the north on the Peruvian border, to Punta Arenas in the south on the Straits of Magellan.
A deal to merge the largest global salmon producer, the Norwegian Marine Harvest, with the largest Chilean salmon producer, Aqua-Chile, has just been made public, with a combined value of US$ 1.8 billion, 380 aquatic concessions, and more than 20% of the world market. The largest wine producers are predicting a banner year in 2015, due in part to the stronger dollar favoring exports but also because the sector is poised to provide a higher valued mix of products to the recovering US market. A recent report from Robobank, the Dutch bank specializing in agriculture, projected that Chile’s agriculture sector will grow by 5% in 2015, and suggested that in their view many of Bachelet’s reforms are necessary for a healthy economy in the medium to long term, even while they may cause some short term problems while affected parties adjust.
Not sure what to make of all this, I guess I’ll do what everyone else is doing: get our of town. The Chilean campo tends to foster a calming reality on confused, stressed urbanites, so I, for one, will be heading right away to Chanco, in the Maule region, to attend the Festival of the Virgin of Candelaria, followed a week later by a three-day festival of Mexican Music (why in Chanco, you ask? I’ll explain all that later.) and one featuring Chanco cheese. This is sure to provide rich fodder for this blog, so I’ll be back in touch with you all soon.
Posted in Santiago, Chile, on January 29,2015.