Latin America Advisor

A Daily Publication of The Dialogue

Will Protests Lead to Drastic Changes in Chile?

Demonstrators have filled the streets in Santiago in recent days, including in the Plaza Baquedano on Oct. 22. // Photo: Carlos Figueroa via Wikimedia Commons. Demonstrators have filled the streets in Santiago in recent days, including in the Plaza Baquedano on Oct. 22. // Photo: Carlos Figueroa via Wikimedia Commons.

Protests have raged in Chile in recent days, with demonstrators taking to the streets over grievances including economic inequality, rising prices, low pensions, as well as poor public health care and education. While this is not the first time in recent years that the country has been convulsed by protests, the latest demonstrations have been on a wider scale, led to much more economic damage and brought deadly violence, with at least 15 people killed so far. How well has President Sebastián Piñera responded to the public’s outrage? Will his promised economic reforms, including an increase in pensions and a new guaranteed minimum monthly income, become law? Are the promised reforms enough to satisfy the protesters, and will they be good for Chile’s long-term stability?

Guillermo Holzmann, professor at the University of Valparaíso in Chile and CEO of Analytyka Consulting: “Demonstrators have imposed peaceful protests and have rebelled against the vandalism of recent days. The massive nature of the mobilizations shows that they are demanding a noncorrupt state and government, capable of protecting the population against the market and its abuses and efficient in public policies. They are also making a concrete call for control and to avoid an abusive market. President Piñera faces an important challenge: to maintain his agenda’s objectives and from there make proposals as he has done so far, or assume a larger leadership to propose a concrete roadmap for adapting the neoliberal model, without losing its essential foundations, with evaluable and transparent goals that provide credibility and viability. This implies a call, from that leadership, to political and social sectors that allow its improvement and implementation in the short, medium and long terms. Without an initiative that’s credible to the population, the protests will become a habitual practice affecting the country’s democratic governance. Until now, President Piñera has focused on restoring public order and responding in concrete terms with increases in pensions, minimum income and bills, without significant progress in Congress so far. This has been insufficient to meet the population’s demands and restore public order. All this amid an important social criticism of traditional media, political parties and democratic institutions.”

Peter M. Siavelis, chair and professor of politics and international affairs and associate director of the Latin American and Latino Studies Program at Wake Forest University: “Simmering protests and social discontent have been the norm in Chile in recent years. However, the most recent spate of protests accompanied by looting, attacks on property and infrastructure and 15 deaths represents a turning point. Post-authoritarian governments of all ideological stripes made much of leaving the dictatorship’s legacy behind, with reforms to the tax code, social welfare and educational schemes, and the legislative electoral system. Nonetheless, politicians have lacked the audacity to fundamentally transform the dictatorship’s most important pillar: Chile’s extreme brand of neoliberalism. For decades, Chileans have borne the brunt of Pinochet’s neoliberalism in the form of low salaries, inadequate pensions and high prices for privatized educational and social services. At the same time, the nation’s elites have reaped the benefits of Chile’s economic boom, making the country among the least equal in the world. Corruption in the police force, price-setting collusion for basic staples, and high utility and transport costs contributed to a deep-seated sense of fundamental injustice. Transport price increases (and the Piñera government’s tone-deaf attitude in implementing them) represented the final insult, tipping the scales toward what most Chileans believe is justified violence. The government’s initial response was equally inadequate. Calling protesters delinquents and terrorists, and contending the country was at a state of war with itself, conjured uncomfortable parallels with the dictatorship. While Piñera’s reforms are a step in the right direction, they are unlikely to quell protests and demands for deeper change to Chile’s Constitution and basic social contract. Chile is in for a long and painful struggle that few expected, many predicted, and that the country’s economic and political elites should have foreseen.”

James Bosworth, founder of Hxagon, LLC and author of Bloggings by Boz: “Piñera’s proposals for economic reforms are certainly better than his initial response to the protests, which was to declare the country was at war and demand that the population choose sides. Even if he passes the reforms, there are very few credible scenarios in which Piñera regains his popularity later in his term. The political pendulum is likely to swing left in next year’s municipal elections and in the 2021 presidential election. That means the real political fight is not between left and right but between Chile’s responsible center-left parties and populist politicians who are eagerly attempting to capitalize on the current crisis. No matter which candidate wins, Chile will have a difficult time maintaining an orthodox macroeconomic policy and paying for additional social spending in a global environment that includes trade wars and low copper prices. The downside of Chile’s globalized economy is that responding to the economic conditions that led to these protests goes far beyond the capabilities of any current or future president in Chile.”

Maria Luisa Puig, Latin America analyst at the Eurasia Group: “President Sebastián Piñera’s initial handling of the protests and his decision to deploy the military increased anger among protesters and will likely hit his already low political capital. A $1.2 billion social package that includes higher pensions, guaranteed minimum wages, low medicines and the stabilization of electricity costs represents the first concrete effort from the administration to quell discontent since protests erupted but will likely fail to resolve the crisis. Protests triggered by an increase in metro fares did not subside after Piñera rolled them back. The unprecedented levels of unrest experienced over the past several days show discontent that goes beyond transport fares. Demands from protesters are diffuse, and there is no clear leadership behind demonstrations. In addition to more social spending, the administration will likely have to make further concessions on its reform agenda. These include modifications to a tax reform initiative submitted last year that has at its core a reintegrated tax regime, which officials had presented as key to boosting investment amid slower-than-expected economic growth. However, opposition lawmakers have criticized it due to its impact on revenue and the perception that it would primarily benefit the rich. The administration’s pension plans are also likely to undergo further modifications. While there is overall political consensus on the need to increase public funds for the solidarity pillar, changes within the private system run by pension fund administrators will continue to be a source of contention. Recent events will therefore leave less room for Piñera’s reforms and shape the outcome of the next elections.”

Editor’s note: The commentaries above were submitted to the Advisor before Friday’s massive protest in Santiago and President Sebastián Piñera’s call for his cabinet to resign.

The Latin America Advisor features Q&A from leaders in politics, economics, and finance every business day. It is available to members of the Dialogue’s Corporate Program and others by subscription.

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