19 December 2017

Chile's New President

Amid a region befallen by economic troubles and political upheaval, Chile has stood out as an island of stability in Latin America.  Despite its recent economic slowdown and the occasional outbreak of socially- and political-motivated protests, Chile has done rather well for itself over the past three decades and is now considered by many to be Latin America’s most stable and prosperous country.  Chile’s economy is not only one of the wealthiest in the region, but also one of its most diversified, despite the fact that copper exports remain the country’s key driver of economic growth.  Chile’s political system is now one of the most stable in Latin America, with a vibrant democracy emerging in the wake of the Pinochet dictatorship.  Now, Chilean voters have gone to the polls to elect a new president (Chile bans the immediate re-election of presidents), with many voters wanting change.  This drive for change was the result of the relatively disappointing second term in office for outgoing center-left President Michelle Bachelet, who was unable to repeat the strong performance of her first term (2006-2010).

From the beginning of this year’s election campaign, former center-right President Sebastian Pinera, who led Chile from 2010 to 2014, was the clear front-runner.  However, he ended up facing a stronger-than-expected challenge from the leading center-left candidate Alejandro Guillier, who overcame divisions on the political left to mount a strong challenge to the former president.  Nevertheless, in the end, former President Pinera won the second round of voting in Chile’s presidential election, defeating Mr. Guillier by the relatively healthy margin of 54.6% to 45.4%.  As mentioned, the former president benefitted from a bruising battle for the nomination of the various left-leaning political parties in Chile, who struggled to unite behind a single candidate as they had done in the past, thus weakening their ability to mount a strong challenge to Mr. Pinera.  Furthermore, Chilean voters remembered the high rates of economic growth that were recorded during President-elect Pinera’s first term in office.

The success of the Chilean economy in President-elect Pinera’s first term in office proved to be the decisive factor in this year’s presidential election, as the campaign was dominated by economic issues.  Between 2010 and 2013, the Chilean economy expanded by an average of 5.3% per year, one of the highest rates of growth in Latin America.  However, since 2014, the Chilean economy has expanded by an average of just 1.8% per year, and while this is not as bad as the economic performances of countries such as Argentina or Brazil during that period, it is nevertheless the lowest four-year average rate of economic growth in Chile since the early 1980s.  During the campaign, President-elect Pinera vowed to enact economic reforms that would attract more investment to Chile and lift economic growth rates back to their former levels.  In contrast, his opponent vowed to continue the economic policies of President Bachelet, policies that that were focused less on growth and more on reducing wealth inequality in Chile.  In the end, many centrist voters yearned for a return to the high economic growth rates of the past and opted for Mr. Pinera.

Sebastian Pinera’s win in Chile’s presidential election was the latest in a series of gains for the political right in Latin America, bringing an end to what had been the dominance of the political left across much of the region over the past 15 years.  Over the past two years, the political right has taken control of the governments of Brazil, Argentina, Peru and Chile, and remains in power for now in Mexico, Colombia and a number of other Latin American countries.  For Chile, the return of Mr. Pinera to the presidency will likely lead to even closer ties to like-minded governments in the region, as Chile, regardless of its government, has championed closer political and economic ties in the Latin American and Pacific regions.  Meanwhile, those remaining left-wing governments in Latin America, most notably Venezuela’s, will find themselves increasingly isolated in a region that has shifted overwhelmingly to the political right.  With more pro-trade and pro-business governments in power, efforts to attract more investment to Latin America are sure to be implemented in the coming months.  Whether or not this will help to revive the region’s struggling economy remains to be seen, but there is no question that Latin America needs to do more to increase investment and economic diversification in order to succeed in the 21st century.