November 18, 2013 2:36PM

The Aftermath of Chile’s Election

Chile went to the polls yesterday in what was perhaps the most important presidential election since the return of democracy in 1990. Many foreign observers focused on the curiosity that the two leading candidates were both daughters of Air Force generals who chose opposing sides during the military coup that toppled socialist president Salvador Allende in 1973. But what is at stake in this election wasn’t Chile’s past, but its future.

Let’s first recapitulate where Chile stands today: Thanks to the free market reforms implemented since 1975 by the military government of Augusto Pinochet – that were subsequently deepened by the democratic center-left governments that ruled the country since 1990 – Chile can boast the following accomplishments:

  • It’s the freest economy in Latin America and it stands 11th in the world (ahead of the United States) in the Economic Freedom of the World report.
  • It has more than tripled its income per capita since 1990 to $19,100 (PPP), which is the highest in Latin America.
  • According to the IMF, by 2017 Chile will reach an income per capita of $23,800, which is the official threshold to become a developed country.
  • According to the UN Economic Commission on Latin America and the Caribbean (ECLAC), Chile has the most impressive poverty reduction record in Latin America in the last two decades. The poverty rate went down from 45% in the mid-1980s to 11% in 2011, the lowest in the region.
  • It has the strongest democratic institutions of Latin America according to the Rule of Law Index of the World Justice Project.
  • It’s the least corrupt country in Latin America according to Transparency International.
  • Along with Costa Rica and Uruguay, it has the best record in Latin America on political rights and civil liberties, according to Freedom House.
  • High income inequality, which has always been a sore in the eyes of many, has decreased in the last decade.

With such an impressive record, it’s quite puzzling that the leading candidate, former president Michelle Bachelet, is running again under a platform calling for changes that would significantly alter the Chilean model by increasing the role of the government in the economy. In particular, Bachelet is proposing free higher education to everyone, the abolition of for-profit private schools and universities, the introduction of a state-owned pension fund in the country’s private pension system, higher taxes on businesses and professionals, and even a new constitution.

Bachelet came in first in yesterday’s election with 46.7% of the vote – short of the 50% necessary to avoid a runoff. On December 15th she’ll have to face again the center-right candidate Evelyn Matthei who came in second with 25%.

It’s very likely that Bachelet will win the runoff, but her governing coalition – which for the first time includes the Communist Party – came short of the two-thirds majority needed to change the constitution. However, her coalition does have enough votes to push for her legislative initiatives on taxes, education and pensions.

It is worth noting that, despite talk of Bachelet enjoying massive support among Chileans, not only did she fail to avoid a runoff, but she actually received fewer votes yesterday (3,070,012) than what she got in the first round of 2005 (3,190,691). A lot has to do with the fact that yesterday’s was Chile’s first presidential election with voluntary voting. Approximately 50% of Chileans able to vote didn’t show up to the polls. This means that Bachelet received the vote of only 22% of registered voters, hardly an overwhelming mandate for radical changes.

This doesn’t mean that Bachelet won’t push for those changes though. After all, her coalition captured a majority of the seats in Congress. Unfortunately, a large segment of Chile’s society seems to suffer from a “high expectations trap,” which involves the danger that a false sense of prosperity sets in before the country actually becomes rich. What we have seen in recent years is that new middle class has become the driving force behind demands for the further expansion of the welfare state.

The future of the successful Chilean model will be at stake in the next 4 years.