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Geopolitics

Chile's Elections Bring Youthful Promises — And Uncertainty

Will Chile's president-elect Gabriel Boric and his team lead the country toward a European-style social-democracy in partnership with business, or will the country turn sharply left if traditional economic powers resist their reforms?

People pass in front of a mural that reads ''live your dreams'' in a polling place during the second round of the presidential elections in Santiago, Chile.

People passing in front of a mural that reads ''live your dreams'' in Santiago, Chile.

América Economía

SANTIAGO DE CHILE – What just ended, and what is beginning in Chile, with the overwhelming victory of the leftist presidential candidate, Gabriel Boric?

The 35-year-old of the Broad Front (Frente amplio) won the Dec. 19 general elections with 55.9% of all votes cast, against 44.1% for the very conservative José Antonio Kast. This removes all doubts on the desire for fundamental changes among the majority of Chileans, especially when the results come in the wake of violent protests in October 2019 against growing inequality, privatization, and increasing corruption. The outcome is also voters' clear endorsement of the October 2020 plebiscite on the adoption of a new constitution, which was in response to the 2019 demonstrations.


For the very many across Latin America who have long seen Chile as a model of socio-economic development, this desire for change may seem strange. Its existing model is neo-liberal, resting on the pillars a central and unchecked role for the free market, a subsidiary state that does not intervene in the economy, the consequent resolution of social problems through private enterprise (in health, pensions, education and housing), and an open door to foreign trade and investments. Its foundations were laid in the civil-military regime of General Augusto Pinochet and coincided with (and perhaps anticipated) the liberal reforms of Anglo-American leaders like Ronald Reagan and Margaret Thatcher.

Chileans also ran out of patience.

There is no denying this model unleashed forces that have had a powerful and positive impact on Chile's economy. In the 1990s and 2000s, the free-market economy changed the face of the country, but two big problems have exhausted that model in Chile. On the one hand, as the country reduced overall poverty, inequalities increased.

On the other hand, without any development policy that was not an immediate response to market signals, the country came to rely on its old, comparative advantage of natural resources. Chile became dependent on selling raw materials and entered into recession in the last decade as the supercycle of booming commodities prices ended. With that, Chileans also ran out of patience.

What to expect from a generational shift in Chilean politics?

The president-elect is 35 years old and represents a radical generational shift. Boric's generation began to mature as the neo-liberal model entered into decline and has challenged it, especially through the universities. Boric and his contemporaries are thus seasoned politicians, if we include their student activism.

The Broad Front is a coalition of several parties and movements with similar origins, but also includes the Communist Party, an unusual leftover of 20th century politics.

The Right's campaign focused on the threat of communism and populism, with warnings that Chile would follow the path of Venezuela, or at least, Argentina.

Photo of Chile's President-Elect Gabriel Boric on Dec. 20 taking a selfie in front of a crowd

Chile's President-Elect Gabriel Boric on Dec. 20

Official Facebook page

Is there a threat to democracy?

We think it is possible, but highly improbable. Chile is a country with a mobilized electorate that votes more than ever for forces that are, for the most part and beginning with Boric himself, committed to democracy. Even Kast, who harbored nostalgia for General Pinochet, had an impeccably institutional attitude, swiftly accepting his defeat and personally visiting the winning candidate.

The new government will have to mitigate expectations and spread them over time.

The country's new coalition will, however, include forces that sympathize with the despotic rulers of Cuba and Venezuela — including the Communist Party — but they are a minority.

What about populism?

We are more cautious in this regard. Boric has fed vast expectations for change in areas like pensions, education, healthcare and housing, amid a downturn in growth projections for 2022 and 2023. Public debt is growing and is estimated to reach around half the GDP in the next year or two. The inflation rate is at around 6.5%, and while partly fueled from outside, it is also in part the fruit of ballooning public-sector spending in response to the pandemic. There is little room left for fiscal generosity, and the tax reforms being envisaged will face a parliament more or less equally divided between right and left. That could tempt the president into turning to populist methods.

In his first speech, Boric emphasized a gradual approach, citing Uruguay's former socialist president, the moderate, jovial Pepe Mújica, to say that he would advance step by step. This is not enough to dispel concerns, which explains the attention being paid to Boric's choice of economic ministers. The new government will have to mitigate expectations and spread them over time or it will find itself under pressure.

Populism may be the despairing, and dispiriting, response to the end of the neo-liberal model. But there are long-term alternatives, and Boric's team includes economists who favor the enterprising state. His proposals for a Development Bank follow that line and take their cue from the ideas of the economist Mariana Mazzucato of University College London. She has shown that the state can act as an investor and backer of even risky projects that ultimately fuel the country's progress. She cites U.S. government backing for private projects like GPS systems, the Tesla electric car or even vaccines against Covid-19. Such participation is not something many associate with the United States, as the free-market country par excellence. Incidentally, Mazzucato's latest book, Mission Economy, has been selling in Chile like hotcakes or a novel by Isabel Allende!

Mazzucato, alongside other economists like Joseph Stiglitz, Thomas Piketty and Ha-Joon Chang, publicly backed Boric. Their hope is not for a state that owns the economy, but which backs key sectors with elevated developmental potential. It was the model followed by Japan and South Korea, as Ha-Joon Chang, a lecturer at Cambridge University, points out. As a sign of the times, we should perhaps add the element of Common Prosperity, touted by the Chinese leader Xi Jinping.

Some in the new president's economic team admire Uruguay, which has duly combined democracy, an open economy, higher levels of socio-economic inclusion and the development of knowledge-based sectors. It is a basic, national consensus, little altered by changes of government.

Will Chile take that path? All we can say for now is that the ending is clearer than the beginning.

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The potential sabotage has raised the question of the vulnerabilities of European pipelines

Christian Bueger

Whatever caused the damage to the Nord Stream gas pipelines in the Baltic Sea, it appears to be the first major attack on critical “subsea” (underwater) infrastructure in Europe. It’s now widely thoughtnot least by Nato – that the explosions that led to major leaks in the two pipelines were not caused by accidents.

The alliance says they were a deliberate act of sabotage.

The attacks occurred in the exclusive economic zones of Denmark and Sweden and demonstrate the risks that Europe’s subsea infrastructures are facing. This raises the question of the vulnerabilities of European pipelines, electricity and internet cables, and other maritime infrastructure. Europe will have to revisit its policies for protecting them.

But it is still unclear how the attacks were carried out. The investigations will probably take months to complete. Still, there are two likely scenarios.

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