Bachelet’s Reform Agenda

Michelle Bachelet / CC BY-SA 2.0.

President Bachelet has started her term with an ambitious and controversial agenda that includes tax, education and constitutional reforms aimed at addressing the country’s inequality. While supporters argue that such measures are essential for Chile to become more democratic, equal, and socially inclusive, critics worry that the reforms go too far and could put the country’s successful model and future prosperity at risk.

To debate this question, on June 11th the Dialogue hosted experts with contrasting views. Sergio Bitar served as senator and minister of state in Chile for three administrations (including Bachelet’s first term) and is currently a Dialogue senior fellow. Joining him was Juan Carlos Hidalgo, a policy analyst with the CATO Institute’s Center for Global Liberty and Prosperity. We were delighted that Chile’s ambassador to Washington, Juan Gabriel Valdés, also offered remarks, which were followed by a wide-ranging exchange with the public.

According to Juan Carlos Hidalgo, Chile is the most successful country in Latin America. Social and economic indicators show Chile’s exemplary performance in terms of prosperity, transparency, human development and democratic strength. Even inequality, which is a major concern for Chile, has and will continue to decrease, according to certain predictions. Such impressive indicators, as stated by Hidalgo, prove Chile’s indisputable economic accomplishments throughout the past couple of decades. “So if it ain’t broken, why fix it?” he said.

Hidalgo is worried that Bachelet’s new reforms will dismantle the current free market economy he says has proven to be so beneficial for the country. The free market model was established in Chile by the military regime of General Augusto Pinochet. The outcomes of these major economic changes that took place in the 80’s, generated an economic boom that is considered by some to be the “miracle of Chile”. Quoting Senator Jaime Quintana, Hidalgo said how Bachelet’s government is “going to use a bulldozer shovel to destroy the antiquated foundations of the neoliberal model of the dictatorship”. Hidalgo sees this as a destruction of Chileans’ opportunities for upward mobility by returning to previously unsuccessful socialist ways.

In contrast, Sergio Bitar believes that –although the country has been undoubtedly successful— the reforms will allow Chile to progress even further. According to him, the previous model had two great limitations: rigid institutions and high levels of inequality. In order to solve these problems, Bachelet’s three major reforms—which target institutions, taxes, and education— must be implemented soon. On an institutional level, Bachelet has plans to change the electoral system and to create a new constitution. In addition, she wants to implement tax reforms that are intended to impact income distribution as well as create a predicted 3 percent increase in GDP by 2018. Her education reforms will also target access and quality of education by improving and reinforcing public schools. Ambassador Valdés argued that education is the main driver of social mobility, and therefore it is essential for improving inequality levels in the country.
Chile has been rapidly growing and changing, and is now in need of a more integrated society.

Valdés, agreeing with Bitar, mentioned the importance of continuing the accomplishments of the past 20 years, but doing so in a way that accounts for the country’s transformation through a “new accommodation between the economy, the political institutions, and society.” Therefore—both Bitar and Valdés agree— the important question is not whether or not the reforms should be implemented, but how.

The experts’ opposing views reflect a broader polarization within certain factors Chilean society, which, as social protests continue to show, remain dissatisfied with the country’s outlook. It will be interesting to see how these tensions unravel as the reforms are debated and implemented.