Tue | Dec 12, 2017

Walter Molano | Chile: Breaking the mould

Published:Friday | December 1, 2017 | 12:00 AM
In this Thursday, November 16, 2017 photo, former Chilean President Sebastian Pinera, who is running again for office with the Chile Vamos coalition, waves a Chilean flag next to his wife Cecilia Morel, centre, after addressing supporters at his closing campaign rally in Santiago, Chile. The billionaire businessman held a big lead in returns, though he didn't get enough votes to avoid a runoff with Alejandro Guillier. (AP Photo/Luis Hidalgo)

Chile is considered to be a bulwark of political stability. Two powerful coalitions have traditionally defined the political spectrum, with the Concertacion on the left and UDI/RN on the right.

The Concertacion was an umbrella coalition that led the country out of the dictatorship of the 1970s and 1980s. The Christian Democrats and Social Democrats were the two major parties that provided the foundation for the political alliance.

Unfortunately, two decades after the country transitioned to democratic rule, the coalition has fragmented into a disperse field of small parties. Radical elements have infiltrated the hierarchy of the left, and the country is now careening towards an unexpected outcome. Last week's presidential elections were no reason to celebrate. Former President Sebastian Pinera secured 36 per cent of the vote, making him the front runner.

However, this was well below the level he was polling on the eve of the elections. At the same time, Alejandro Guillier got 22 per cent of the vote, and Beatriz Sanchez won 20 per cent.

Many Chileans were convinced that Pinera would win in the first round, with 50 per cent plus one vote. He was leading the field by 20 points, but in the end, his margin dropped to 14 points. This is reason for concern, given that the opposing candidates can now come together and possibly defeat him. The run-off election, which is scheduled for December 17, will be between Pinera and Guillier. However, the latter may have the upper hand.

Alejandro Guillier started his public career as a television and radio personality, having worked as a journalist. He moved into the political sphere in 2013 when he ran, and won, the senate seat for the Second District of Antofagasta. He was very quiet on his economic platform during the presidential campaign, knowing that he was one of the front runners, but he would probably not secure an outright win during the first round.

Guillier said that he would present his agenda once the results of the first round were known. What this meant was that he knew he would have to negotiate with the other parties to build a coalition to bring to bear against the front runner, former President Sebastian Pinera. A great deal of horse-trading will take place, as policy positions and ministries are offered up in return for political support. Given that most of the remaining field is from the left or the hard left, the platform will probably take a radical tilt.

Managing political coalitions

Coalitions are hard to manage, but the decline of the Concertacion rests firmly on the shoulders of President Michelle Bachelet.

Although her father was a brigadier general in the Air Force, he was a member of Salvador Allende's government and opposed the military coup. He was arrested after General Augusto Pinochet forcibly took control of the government and was basically tortured to death.

The young Michelle Bachelet and her mother were subsequently arrested and harassed. With the help of a family friend, they were exiled to Australia. In 1975, she moved to East Germany, where she commenced her medical studies. She returned to Chile in 1979, well before the end of the dictatorship, to continue her studies. In 1990, after the end of the dictatorship, she joined the new civilian government.

At first, she was involved with public health issues. She also served a stint as Minister of Defence under President Ricardo Lagos. In 2008, she was elected president for the first time. Although she never lost her leftist credentials, her administration was centrist.

Her finance minister, Andres Velasco, is a graduate of Yale, with a doctorate from Columbia University. He was teaching at Harvard when he was invited to join the Bachelet administration. He was well regarded for his economic stewardship, and the Chilean economy did well. However, when Bachelet decided to run for a second time in office, she swerved firmly to the political left. She aligned herself with the Communist Party to ensure that she could win against the UDI/RN coalition.

Even though the Chilean Communist Party is small, it was enough to get her past the finish line. In return, she promised to adhere to a more leftist agenda during her second term, introducing a set of labour, education and tax reforms that set the economy back.

Her time in office coincided with a sharp drop in commodity, particularly copper, prices. This left the Chilean economy in the doldrums, independently of what was happening on the policy front. Nevertheless, Bachelet, and her coalition, took the blame, and the alliance crumbled into a handful of factions.

Today, the Chilean political landscape is fragmented. Pinera may have the lead, but there is a good chance that the radical fringes that have emerged from the implosion of the Concertacion may coalesce together and win the day. This will push one of the most politically stable countries in Latin America into politically uncharted territory.

- Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.

wmolano@bcpsecurities.com