May 17, 2022

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Chile can again be an example to developing countries

Borik seeks to integrate social justice with economic growth within the environmental framework.

Chile has an unequal influence on economic thought. During the dictatorial government of General Augusto Pinochet (1973-90), Milton Friedman’s followers of the free market policy pioneered radical policies such as opening the economy to world trade, privatizing state – owned enterprises and creating private pensions. Margaret Thatcher is a fan.

Pinochet’s dictatorship began with a coup and ended with a horrific human rights record: more than 3,000 political assassinations and thousands were tortured or deported. That era of repression was fortunately buried with a peaceful transition to democracy, but the pro-market economic policies of the dictatorship were perpetuated by successive elected governments. They are proud to have made Chile one of the most investor friendly and fastest growing economies in the world, despite persistent high inequality.

On Friday, Chile enters a new era with the inauguration of President Gabriel Boric, a young leftist who marks a clear break with his predecessor, 72-year-old conservative billionaire Sebastian Pinera. At the same time, the specially elected legislature completely rewrites the constitution of the Pinochet period.

The hope is that Chile will be able to renew itself to deliver European-level welfare and social justice, while safeguarding economic growth and the investment needed to pay for it. The risk is that as European growth and debt levels reach, it will be difficult for a rapidly expanding state to finance itself and spend wisely.

Both the new government and the Constituent Assembly are the result of struggles that began in Chile in October 2019. Protesters demanded a just and inclusive community, better public services and decent pensions. Borik was among the protesters, at the age of 36, of his generation. It is deeply committed to the rights of women and indigenous peoples and respect for the environment. He was selected on a platform that seeks to raise taxes to fund major improvements in public services.

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Investors are alarmed as Chile has turned left. More than $ 50 billion has left the country since street demonstrations and companies postponed important projects. Mario Marcel, a respected technocrat, was appointed Minister of Economy and sought to allay the fears of war by emphasizing financial responsibility.

The new president has shown the will of a politician to heal the divisions caused by highly polarized elections. He has been a vocal critic of the repressive regimes in Cuba, Nicaragua and Venezuela.

Very good so far. However, there are big challenges ahead. The economy is in danger of stagnation as the stimulus is withdrawn. Record prices for copper, Chile’s main export, are offset by rising energy prices. War does not have a majority in Congress, where every bill must be negotiated hard.

The greatest danger of all is the unpredictable outcome of the Constituent Assembly. Elected during the epidemics with low turnout, dominated by the far left and the Maverick Independents. The proposals discussed so far (though not approved) include the creation of 11 different judicial systems for different tribal groups, the abolition of “capitalist” separation of powers and the nationalization of mining.

Borik has a unique opportunity to show that Chile can once again set a global trend, this time creating a better and greener community, while maintaining growth and private investment. This may be a new model for Latin America and developing countries. However, it will be necessary to control the fluctuations of the Constituent Assembly.

Editorial Board

Patent – The Financial Times Limited 2021.

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