On January 17, when Sebastian Piñera, multimillionaire candidate of the rightist Coalition for Change, won Chile’s latest presidential election, the event signaled the end of 20 years of governing by the Concertacion party. That coalition party, which comprises parts of both the center and the left, was the key opposition to the military regime of General August Pinochet, who ruled Chile from 1973 to 1990. Piñera won the second round of the elections by defeating Eduardo Frei, candidate of the governing party and the former president of the country from 1994 to 2000. Pinera won 52% of the vote.
His victory was somewhat paradoxical, given the high popularity of the outgoing president Michelle Bachelet, who was not eligible for reelection. Last December, Bachelet won a historically high 81% of support from the population, according to a survey by Adimark, a Chilean company that specializes in public opinion surveys. However, Carmen Norambuena, professor of humanities at USACH, the University of Santiago de Chile, explains Piñera’s victory by citing the internal crisis of the political party that has led Chile for so much time. “The Concertacion arrived in power with a plan for the country, but it saw more and more that there was a need to negotiate in Congress, where the Concertacion does not have a majority, which meant that it lacked a clear political ideal, and that disenchanted the electorate.”
Nevertheless, the result of the presidential election in no way represents a “turn toward the right” for the population, argues Norambuena. “What took precedence here was the wariness of the voters toward the governing groups, who were not responding to the demands of the population” – such as the public’s desire for increased salaries, improvements in education and health, and fundamental measures for dealing with legal affairs, corruption and crime, among others.
As a result, despite the fact that President Bachelet is perceived as a great leader, adds David Diaz, professor of economics and business at the University of Chile, “the voters were aware that the government not only requires outstanding personalities but teams that work in a coordinated way to satisfy the needs of its citizens.”
Piñera understood the climate of disenchantment among the population, and he was more effective in his electoral campaign than his opponent Frei. According to Igor Goicovic, professor of humanities at USACH, Piñera “made an appropriate diagnosis of the political damage, and put the accent on change. Starting from there, a campaign known as ‘Alliance for Change’ was born, and it did not need to dig any deeper into a society that was strongly depoliticized and unsatisfied like Chile’s.” On the other hand, Carlos Donoso, director of the history program at the Andres Bello University, stresses the ineffectiveness of the “considerable investment in advertising made by Piñera, who transformed himself into a ubiquitous personality.”
The Piñera Fortune: A Double-edged Sword
According to Goicovic, the key that enabled Piñera to capture the electorate is the fact that he is widely known for his millions of dollars of investments in Chilean companies such as LAN Airlines – where his companies own an estimated 26% of the shares – Blanco y Negro, a firm controlled by the Colo Colo soccer team; Chilevision, the TV channel; and Clinica Las Condes, a modern medical clinic.
This is due to the transformation of Chilean society, which “has begun to create a new model of the social individual based on the accumulation of capital,” he says. He adds that even “at the level of mass society, what predominates today broadly in Chile is the entrepreneurial paradigm. There is a new phenomenon in which the dynamic of getting rich is well-established in Chilean society.” The new social model was evident in the 2009-2010 Ranking of Global Competitiveness published by the think tank The Institute for Policy and Strategy on National Competitiveness. Among other things, this study revealed that for Chileans, business people are the social leaders; not politicians.
When it comes to being a businessman, the 60-year old Piñera, who has a graduate degree from Harvard, wins the award. His fortune is estimated at US$1 billion and by the time he assumes power, he will move up from the 701st spot in 2009, to 15th in the rankings of the world’s billionaires by Forbes magazine. Nevertheless, although business success may have helped to lift him to victory, his wealth has turned into a double-edged sword for the president-elect.
Piñera promised that he would cut his links with all of his investments before assuming his position, but his main detractors have noted that the process of selling his properties is moving ahead slowly, and they are also worried about how he will divest his assets. When Piñera refers to selling his assets, he means those shareholdings that are publicly relevant, says Donoso. “Without doubt, LAN is one of those properties. The case of Chilevision is different because the President-elect plans to donate that property to a foundation. His other real estate, savings and lesser businesses would enter into a blind trust – a mechanism that permits a person who exercises a high public position to cede the management of his ownership to an independent third party, and have no chance to administer those assets by himself.” In theory, this trust would guarantee to Piñera that he preserves his ownership when he assumes power. Moreover, from a legal point of view, he will not be able to participate in their administration. “However, what person would resist staying on the margins of his interests [the assets he owns] when he has spent his whole life keeping an eye on them?” asks Donoso.
Donoso warns that “managing his investments will be a very sensitive point, and Piñera must be very careful.” He adds that the logical thing is to comply with everything that he has indicated. That is to say, “to create foundations; renounce his posts in those institutions that are presumably incompatible with public service; sell his shares; and play the role in the blind trust.” In sum, those procedures that Piñera utilizes in order to transfer his investments must be very transparent, and not awaken doubts. On the contrary, “the president elect will open up a whole host of criticism that will affect his personal ambitions, and also impose conditions on his government,” he asserts.
Recently, Piñera raised a wave of criticism after declaring to the local media that “the salary of the President – which consists of 10,333 euros a month – is not enough to cover my personal needs and the commitments made during my campaign.” In response, representatives of the Concertación party said that this comment represented a “joke” for Chilean workers.
Economic and Political Challenges
Many of his opponents also wonder if Piñera is capable of translating his business skills into the realm of politics. In the opinion of Norambuena, his experience in the business world would not be transferrable to conducting the politics and administration of a country. “The networks and contacts that are created in the economic realm do not determine agreements and advancements in the political field. Over the last 20 years of Chilean history, the chiefs of state have, for a long period of time, brought with them their own political capital such as, for example, ex-presidents Patricio Aylwyn (1990-1994) and Ricardo Lagos (2000-2006). This political capital is expressed through international networks, pre-agreements and collaborative commitments. To a lesser degree, Sebastian Piñera brings all of those.”
Now, “if the president-elect manages to choose his immediate collaborators well, he could be in a good position to fulfill his governing goals,” notes Gorge Gregoire, professor of economics and business at the University of Chile. No doubt, this team of collaborators will play a strategic role in bringing to life the economic promises that the president-elect reiterated during his campaign. Among these are “defeating poverty and turning Chile into a developed nation, which will require that the country grows at an average annual rate of 6% during the coming years,” notes Larraín, the professor of economics at Pontifical Catholic University of Chile who will become the country’s finance minister. According to the Central Bank of Chile, the country’s Gross Domestic Product fell by 1.9% in 2009. In 2010, expectations call for the economy to grow by between 4.5% and 5.5%. “Another cornerstone of the Piñera program is the creation of one million jobs between 2010 and 2014,” he adds.
Piñera recently unveiled the team that will take office on March 11. The most remarkable aspect concerning the profile of the members of the cabinet is the proliferation of technocrats and business graduates from the Pontifical Catholic University of Chile as well as those with postgraduate degrees from prestigious U.S. universities. The Minister of Economy will be Juan Andrés Fontaine, an MBA graduate from the University of Chicago, and Felipe Larrain has been chosen as the Minister of Finance. Larrain holds a Ph.D. in economics from Harvard University, and has experience as an entrepreneur and has been a consultant to the World Bank and International Monetary Fund (IMF).
However, for Donoso the principal economic challenge that Piñera must confront is how to maintain a coherent policy of public spending that enables him to maintain reserves and amortize downward cycles in the global economy, the way the current government did during the recent crisis. “Unfortunately, the generous offers that Piñera made during his campaign – and which he must fulfill – will possibly work against moderation. You have to hope that once he has complied with the commitments of his campaign, good sense will rule, and the President-elect will turn spending into social investment.”
There are also other challenges still outstanding that generate a greater amount of tension in the population, such as how to improve education and public health, asserts Goicovic. “Piñera has been particularly evasive about these subjects, and it is normal for that to be the case, since these topics have not been addressed adequately by the Concertacion [Party], and the ‘recipe’ of the right [wing] does not differ structurally from that of the Concertacion [Party]. Both proposals point toward a greater degree of privatization in services for education and health.”
It’s not just education and public health that figure among the President-elect’s potential plans for privatization; there is also Codelco, the state-owned copper company. Following a press conference, Piñera noted the possibility of privatizing 20% of the state-owned company since in his view Codelco has lost productivity and competitiveness against private mining companies, and that has sparked a great debate in industry. Representatives of Codelco, the government and trade unions in the sector came out to defend the state-owned character of the company, emphasizing that during the last four years, Codelco has contributed an average of US$6.5 billion in tax revenues to the government.
As for the political situation, Piñera will face “a strong opposition characterized by high popular participation, with important figures and the endorsement of two decades of sustained material progress,” notes Donoso. “Nor will Piñera be able to neglect the pressure by the parties of the left, with a strong presence from the workers and student movement, and less from the traditional right, which is a sector that supported his candidacy and shares his liberal ideas about the economy, and not just that.”
Relationship with Neighboring Countries
During his first encounter with foreign news correspondents, Piñera noted that he expects to establish a very fertile relationship with all of the countries of Latin America, especially with his neighbors Argentina, Bolivia and Peru.
Nevertheless, bilateral ties with Peru represent a major challenge for Pinera, since he must resolve the “unpleasant” border dispute with the Andean nation, which dates back to 1985 and which is today in the hands of the International Court of The Hague. In January 2008, the Peruvian government brought to the Court its border demand against Chile. Peru affirmed that the strip of water, 37,900 square kilometers in the Pacific Ocean between the cities of Arica and Tacna – should not be clearly demarcated while Chile asserts that this region – rich in such resources as anchovies – forms part of its sovereign territory, and Chile is seeking the protection of existing international treaties.
“Although this is inherited from the government run by the Concertacion party, the political cost of a possible Peruvian success in The Hague would be imposed on its own [Chilean] administration. On the other hand, if the court favors the Chilean position, this victory would be awarded to those who were in charge of managing the case, and at this moment they belong to the opposition. Giving credit for the vindication of the Chilean position to its government would be for Piñera a challenge as large – or even greater than – convincing the jury in the Hague.”
According to Donoso, while diplomatic ties between Chile and Bolivia have also been marked by a history of maritime demands, this should not affect Piñera’s management of bilateral relations between those two countries. Bolivia claims sovereign rights to a strip of land that leads to the sea that the country lost to Chile in the War of the Pacific in 1879; a war in which Bolivia allied itself with Peru against Chile. For Bolivia, that defeat meant the loss of the only territory that it ever had that provided an outlet to the sea – through the former port of Cobija.
With Argentina, in contrast, there is an existing process of economic integration that should move forward without great traumas, especially now that its energy sector’s dependence on natural gas – until recently, Chile depended on Argentina for its energy supply – is no longer on the agenda of issues between the two countries, notes Donoso.
At least for the moment, bilateral relations between Chile and Venezuela have gotten chillier, since Piñera and President Hugo Chavez have played a leading role in a verbal confrontation that attracted the attention of the entire region. A short time ago, Piñera declared that he did not agree “with the way that democracy is practiced in Venezuela.” This comment made Chávez angry, and he responded immediately that Piñera “should not meddle with us, and should get busy governing Chile.” He added that Piñera “is a very rich businessman and it is impossible for him to agree with a socialist revolution.”
In a gesture of collaboration, Michelle Bachelet invited Sebastian Piñera to accompany her to the next Summit of the Group of Rio, which will take place on February 21 in Cancún, Mexico. Her request reflects both the sympathy and the apprehension that the future president of Chile awakens among his counterparts elsewhere in Latin America.
