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The dramatic fall of Chile as Latin America’s neoliberal role model

 

 

By Ariela Ruiz Caro  

March 2, 2020 — Links International Journal of Socialist Renewal reposted from Americas Program — After the outbreak of the most intense and massive social protests ever recorded in the history of Chile, on November 16 the government and most political parties signed an agreement to restore peace and public order and initiate a process to draft a new constitution.

The protests, triggered by the rise in subway fares on Oct. 18, called into question the supposed Chilean success story of the neoliberal economic model implemented in the country during the dictatorship of General Augusto Pinochet (1973-1989). Developed by the so-called Chicago Boys, successive administrations since the 1990 return to democracy in 1990 sustained the model as state policy.

Economic and especially financial liberalization; privatization of public services, including water; the subsidiary role of the State; unlimited protection for foreign investments; and insertion in the international economy that serves US policies designed for the region were the fundamental elements of the economic model that Chile pioneered globally.

Chile’s achievements in macroeconomic stability, sustained economic growth and significant reduction in poverty levels solidified its image–promoted by the international system–as a role model in Latin America. For many years, Chilean citizens also believed it. However, behind the stable statistics and the high growth rates per capita, lurked growing inequality and concentration of wealth that eventually revealed the deep cracks in the system and sparked the recent protests. Chile is currently the 12th most unequal economy in the world [1].

The Chilean government’s declining legitimacy

Most analisis of Chile’s surprising social uprising have focused on economic aspects and less on Chile’s deep political crisis, characterized by the loss of citizen representation in political parties and government. An important part of the protest movement’s demands include greater citizen participation.

According to the October Social Thermometer Survey, 85% of citizens support the grassroots protests, and 80% demand a new constitution. The current constitution, written during the military dictatorship, dates from August 1980. The decline in the legitimacy of the Piñera government in the eyes of the popularion has been intensified by the serious criticisms of the Inter-American Commission on Human Rights, the Human Rights Commission of Chile and the OAS General Secretary for violation of human rights by the government to suppress protests.

All this has resulted in an unquestionable loss of leadership of Chile in the international arena. The Piñera government had to suspend the Asia-Pacific Economic Cooperation Forum (APEC) Summit that should have taken place in Santiago. Likewise, the United Nations Conference on Climate Change (COP25) was forced to make a last-minute move to Madrid. Chile today cannot offer basic guarantees even as the venue for international sporting events. The South American Football Confederation (Conmebol) decided to move the venue of the 2019 Copa Libertadores final that will be played by the Flamengo (Brazil) and River Plate (Argentina) teams from Santiago to Lima.

Chile has lost leadership in regional bodies. It no longer can play its leading role in the Lima Group, an ad hoc body created by 13 Latin American countries and the United States in August 2017 to press for regime change in Venezuela; in the creation of the Forum for the Progress and Development of South America (Prosur) [2] launched March 22 to replace the Union of South American Nations (Unasur); or in the aborted U.S. plot to deliver humanitarian aid to Venezuela across the border with Colombia that had the region in suspense in February. The grassroots explosion, has not only knocked Chile off  the pedestal on which the success of its neo-liberal model was erected, but also removed its articulating role with the United States and allied countries in the region.

The demonstrations have also had an impact on the country’s economy. The volume of sales and consumption has dropped, along with imports and exports. The stock market has gone down, and the national currency has been devalued. The limited operation of many domestic activities and the suspension of the aforementioned international events will have an impact on economic growth. In this scenario, the opposition presented the departure of President Piñera and the call to a Constituent Assembly as the key pieces to achieve a solution.

The hidden face of Chilean economic success

Although Chile sustained per capita economic growth above the Latin American average and poverty levels fell from above 40% of the population to less than 10% in the last three decades, those who came out of poverty generally did not reach the levels of consumption that are usually associated with middle class status.

Fifty percent of the economically active population earns less than 550 dollars per month, with the minimum wage equivalent to 414 dollars. Overwhelmed by the narrow strip that separates it from the poverty, an important part of the population lives in fear of seeing their income fall. [3] In Chile, downward social mobility is greater than upward social mobility, and downward mobility is more highly correlated to political protest than poverty itself. [4]

The biggest factor that exacerbates inequality is probably the nation’s pension system, in force since 1982. Designed during the military government [5], the pension mechanism has not met Chileans’ expectations. According to the group No + AFP (No More Pension Fund Managers), which in 2016 organized a march of 600,000 people, these are “undercover banks of the richest entrepreneurs in our country who use the pension funds to expand their investments and further concentrate capital in a few hands”. [6] The average pension for retirees is $286 per month, and 80% receive pensions below the minimum wage. The amount of pensions is on average close to 40% of people’s income at the time of retirement.

Education is the second major source of inequality. In 2006 and 2011, student s organized massive demonstrations calling for profound reforms in the education system. Chilean education is characterized by the huge gap between public and private education. The withdrawal of the State from its functions as generator, regulator and supervisor of the education sector led to the gap as part of neoliberal reforms beginning in the 1980s.

Former Chilean rulers unanimously recognize that the situation of inequality generated social unrest and led directly to current protests in this country. Rolf Luders, Pînochet’s former minister of economics and now a professor at the Institute of Economics of the Catholic University of Chile, admits that “the income of the vast majority of Chileans is still low in absolute terms and the income differences are very significant.” Luders adds that “there have been abuses not duly sanctioned by the State.” Former president Ricardo Lagos points out that “citizens feel that although poverty has decreased substantially, there is a very high concentration of income, and a level of inequality that has not been adequately addressed.”

Lagos told local press that “Chile needs to increase taxes, especially for the rich because more public services are needed” and warns that people demand a new social contract so that the fruits of growth reach everyone. “[7] President Piñera himself, after denying and ignoring the protests, said that “It is true that problems had accumulated for many decades and that different governments were not able to recognize this situation in all its magnitude.” In the early days of the demonstrations Piñera sought to disqualify the protests, stating that they were “at war against a powerful, relentless enemy, that respects nothing and no one and is willing to use violence and crime without any limits, even when it means the loss of human lives, with the sole purpose of producing as much damage as possible. ”[8]

But the punitive approach of declaring a state of emergency in the country and giving control of citizen security to military commanders only served to fuel the fire and increase violence. Now that the protests have produced some two dozen deaths, thousands of wounded and detained, and complaints of torture, Piñera has been forced to make changes in his Cabinet, to suspend the state of emergency and curfew in force in some cities, and to announce economic measures that favor popular demands.

Politics for the elite

The uprising has revealed cracks not only in the Chilean economic model, but also in the political and social spheres. The neoliberal economic system requires an exclusionary and limited democracy, which Chile successfully built in the three decades of democracy since the end of the military dictatorship in 1990. For many years, a binomial electoral system designed during the dictatorship encouraged the participation of only two political blocs that alternated in government. [9] That system resulted in the concentration of power among a narrow elite.

One of those two blocks was the Concertation of Forces for Democracy (since 2011, New Majority) while the other, is the center right Alliance for Chile (since 2009, Coalition for Change). Except for the previous period of the government of Sebastián Piñera of the National Renewal Party (2010-2014) and the current one, (2018-2022), the government has been in the hands of the Concertación parties. The Socialist Party ruled three times: first, with Ricardo Lagos (2000-2006), and then Michel Bachelet twice: (2008-2010) and (2014-2018). But in essence, they never moved away from the model, which resulted in political and economic stability that governed for market needs, but not for the citizenry. [10] In La violence des riches, Michel and Monique Pinçon describe a similar phenomenon in Europe, particularly in England and Germany, in which socialist leaders joined neoliberalism and capitulated to the neoliberal model. [11]

The authors point out that neoliberalism creates a social class that mobilizes based on its interests on all fronts (politics, finances, the media, art, music, among others). It leaves nothing to chance. Ideological and linguistic manipulation prevails that causes a loss of critical thinking, also neutralized by the voracity of consumption that paralyzes the claims of citizenship against inequality. In this neoliberal phase, they point out, the financial system imposes policy.

Economic power, they argue, acts to preserve order and the middle and popular classes rarely question it. That is why the model is presented as natural and eternal, like the sun that heats the earth or the moon that shines. However, they warn, this situation could change “when respect for that hierarchy is lost, when citizens recognize themselves as human beings and wonder ‘If I didn’t work, what would they do? They could not achieve anything.’ It is then that, through questioning this type of aristocracy of money, chaos and rebellion ensue.”

This is what is happening in Chile. The WhatsApp audio leaked at the beginning of the protests Chile’s first lady, Cecilia Morel and a friend where she describes the Chilean protesters as “a foreign invasion, alien” [12], evokes Marie Antoinette and the gaping distance between her spouse, Louis XIV, and the French people.

Chile has a deeply elitist society. “People’s capacity for development is limited by their last name, by where they live, by the school they can pay for or not pay for for their children”, in a scenario in which citizens have the perception that 80% of the state administration is corrupt or very corrupt. [13]

Although Chile does not hold the prize for the highest rate of corruption in Latin America, it is not exempt from it. [14] Illegal financing to political parties, embezzlement of public funds in the army, fraud in the police, and collusion between large companies to increase the price of medicines (especially for chronic diseases) and some essential products, have discredited politics and institutions. In addition to economic inequality, a sense of impunity and loss of citizen representation among their elected officials prevail. That also explains why abstention has increased.

Those who refuse to admit the failure of Chile’s development model describe the recent grassroots protests as revolts of the First World, similar to the “indignados” in Spain or the “yellow vests” of France. They argue that the popular demands reflect a crisis of unfulfilled expectations in developed countries. These countries have a margin of negotiation to overcome the conflicts arising from their demands. That is not the case of Chile, whose government is against the ropes because there is no room to negotiate if no profound changes are made in the model.

Others, such as President Trump, have denounced “the interference of other nations in Chile, with the aim of” undermining “Chilean institutions, democracy and society.” [15] Officials from the U.S. State Department have reported that “false accounts that emanate from Russia have been identified, pretending to be Chilean and trying to undermine Chilean institutions and society.” [16] But the Minister of Interior and Public Security of Chile, Gonzalo Blumel, did not corroborate the U.S. claim and instead stated “I prefer to be prudent, to check out the antecedents and, if they are indeed true, to investigate them in the corresponding instances.”

The OAS General Secretariat, on the other hand, stated that the protests in Chile follow the pattern of those that occurred previously in Ecuador and Colombia and noted that “the breezes of the Bolivarian regime driven by madurismo and the Cuban regime bring violence, looting , destruction and a political purpose of directly attacking the democratic system and trying to force disruptions to constitutional mandates.” [18]

The newspaper La Tercera de Chile reported that foreigners of Cuban and Venezuelan origin were behind the attacks on subway stations. However, the prosecutors in charge of the investigation concluded that “there is no evidence regarding specific identities or nationalities”. [19]

Some analysts conclude that the government itself could be behind some violence and destruction of public and private property throughout the country, noting “there are serious suspicions, testimonies and eloquent visual records that, while indicating that they were organized, could have been carried out by Chilean intelligence services” . [22]

The accusations against the protesters sought to justify the declaration of a state of emergency and the consequent control of public security by the military forces after President Piñera pointed out, at the outset, that the country was in a war against a powerful enemy. But it was a serious mistake to criminalize social protest instead of responding politically. Days later, he had to withdraw the measures after apologizing to the citizens for not having listened to their demands.

Piñera backed in a corner

Although the president withdrew the price hikes in public transportation and electricity and approved a set of social measures including an increase in minimum wages and pensions of retirees, a plan to support small and medium-sized companies affected by the protests, and higher taxes for the rich, protesters continue to organize  throughout the country. Although they lacked a central leadership, their organization began to take shape in the barrios and in neighborhood associations and social groups convened in open councils, in which the common demand was to change the constitution. They view the text of the current constitution as the major limitation to satisfying many of their demands, in particular, that referring to the subsidiary role of the State.

To gain the upper hand and more time, on Nov. 6 Piñera announced his intention to open up a 60-day period of  “citizen dialogues” to collect proposals on the public’s main demands. It is a mechanism similar to the one used by Macron when he confronted the yellow vests movement. But Chile is not France. The discontent and social frustration in the Andean country has been incubating for more than three decades and its level of unionization is low. France, on the other hand, has strong civil society organizations and a much more consolidated democratic tradition.

The intensification of the protests reached a level that forced Piñera to announce on November 9 that his government was preparing a project to update the Constitution promulgated in 1980, during the dictatorship of Augusto Pinochet. He stated that it should be discussed with other proposals that had already been presented in Congress. His announcement represented a shift with respect to his initial positions, since when he assumed the presidency in March 2018 he affirmed that he would shelve a bill that his predecessor, Michelle Bachelet, sent to Congress to modify the Constitution. Bachelet’s initiative sought to consecrate the inviolability of human rights, the right to health and education, and guarantee for equal pay for men and women.

Although the government and citizens technically agreed to change the Constitution, there was no agreement on how to do it. Citizens did not agree to modify the Constitution through a Constituent Congress as proposed by President Piñera, since this implied that the current Congress would designate a group among its own members to modify the Constitution for a period of twelve months. The problem was that civic and social organizations wanted to participate directly in the new Constitution so they proposed to draft it through the election of a Constituent Assembly, a group of people directly elected by the population who cannot be members of the current Congress and whose specific function is to design a new Constitution and present it for ratification by plebiscite.

The central point of contention in the text of the Constitution is the principle of state subsidiarity, which mandates that the state can only intervene when basic needs cannot be met by private agents. As historian Nicole Schwabe of the Center for Inter-American Studies at the University of Bielefeld points out, the State left a great void when it withdrew from provision of social services since many basic rights, such as education, health and pensions, were left to private individuals, who applied strictly commercial criteria.

“This has caused the major problems of recent years and the emergence of movements and a series of social protests,” she noted, adding that while there were improvements, “the political system has not been able to respond to the demands of the social movements that have been coming for years. There is no way out of this conflict if there is no constitutional change. If the necessary measures are not taken, the violence could escalate further. ”[23]

In this same line of thought, the Catholic Church spoke through the apostolic administrator of Santiago, Celestino Aos, who expressed the imperative need to change the Constitution, arguing that “if no profound changes are made, we will be talking about cosmetic changes and we will go back to repeating the same story”. [24]

Piñera is backed into a corner. His current approval rating stands at 13%, and is in free fall. The massive protests continue. While Chilean citizens have demonstrated peacefully, there is so much discontent and frustration accumulated over the years that, in the midst of these, groups of anarchists and others have lit fires, erected barricades and looted to create chaos.

The high military commanders have pressured the government to respond. At the same time that Piñera extended a hand to citizens by satisfying certain demands, such as proposing French-style citizen dialogues and offering to draft a new constitution, military commanders urged him to exercise a heavy hand against citizen ingovernability and lack of control. This would explain why on Nov. 8, Piñera chose to harden his speech again and criminalize grassroots demonstrations. He announced several measures such as the Anti-hood Law, convening of the National Security Council and initiatives to support the work of Carabineros (militarized police) and the Chilean Investigative Police. This would only contribute to worsening violence.

Meanwhile, complaints of violation of human rights in this country continue to accumulate. The UN denounced the arbitrary and indiscriminate use of tear gas and rubber bullets to contain the protests and asked the country’s security forces to stop using these projectiles immediately. It also drew attention to “the large number of dead and wounded” and made an appeal to “align violence control actions to existing international standards, ratified by the Chilean State.” [25]

The OAS General Secretariat also deplored the deaths, both those caused by the use of force by the State, and those that have occurred in the context of the looting. The regional organization announced it would endorse the investigations and conclusions of the Inter-American Commission on Human Rights (IACHR) on human rights violations in Chile. [26] Representatives of the IACHR traveled to Chile “to respond to the requests of dozens of organizations of Human Rights, Social Movements and Indigenous Peoples, representatives of Political Parties, legislators and legislators, intellectuals, artists, in addition to the Ombudsman’s Office Rights of the Child. ”[27]

According to the November report of the National Institute of Human Rights of Chile, 2,365 people have been injured in demonstrations, more than 6,000 have been arrested and the agency has filed 335 complaints of torture, sexual violence, homicide and attempted homicide, among other crimes. It reported that since the beginning of the demonstrations on October 18, a total of 217 people have suffered eye injuries. The current figure is closer to 300. The Chilean Society of Ophthalmology warned of a health emergency in these cases, and the vice president of the Medical College of Chile, Patricio Meza, said that government security forces have not respected the safe distance for firing projectiles, has aimed above the waist and on occasion fired in the presence of children, pregnant women or people with reduced mobility. Both the BBC and the New York Times have reported on the attacks, the latter in an article entitled “It’s Mutilation”: The Police in Chile are Blinding Protesters ” [28].

The Chilean opposition signed a constitutional accusation in Parliament to remove Piñera, who has racked up  multiple complaints for human rights violations. At least one of them has been accepted by a Chilean court of justice. This lawsuit filed by a group of human rights lawyers cites “the responsibility that falls (to the president) in his capacity as author, as head of state and of all those responsible as perpetrators, enablers and/or accomplices of these crimes against humanity. ”[29]

Can a peace agreement and the promise of a new Constitution deactivate protest?

In this context, on Nov. 16 most Chilean political forces represented in Congress reached an agreement to restore peace and public order and convene, in April 2020, a plebiscite for a new Constitution that replace the current one. [30] The popular consultation will contain two questions: Do you agree to change the Constitution, and what should be the mechanism for drafting it. This may be through a mixed constitutional convention – composed of one half of active parliamentarians and the other half new delegates, or with a totally new convention, similar to a constituent assembly.

If citizens choose a constitutional convention, their members must be elected in the same electoral process that will elect regional mayors and governors in October 2020, with universal suffrage. Once the new Constitution has been drafted, within a maximum period of one year, the text will be submitted to a ratifying plebiscite, carried out through mandatory universal suffrage. Finally, Congress will vote again.

Although the agreement has long deadlines given the urgency of citizen demands, the decision to draft a new Constitution and get rid of the current one represents a historical moment for Chile and the world. It demonstrates that it is possible, through citizen protest, for a government to relinquish the primary legal instrument that guarantees political and economic control of society to powerful elites. However, it will be necessary to see how much political parties truly represent the people and how much tolerance economic and media power groups will have with the measure, which threatens their stability. Both factors will depend on whether the measure can deactivate grassroots protest, the citizen councils and the acts of violence.

The popular uprising in Chile has unmasked the image of well-being in Chilean society that the international establishment has been selling. It has affected the government’s regional leadership and its projections of economic growth and has revealed an injured society, which has added issues pending solution such as trials for violations of human rights, reparation for victims of violence and freedom for political prisoners.

Ariela Ruiz Caro obtained her degree in  Economics from Humboldt University of Berlin and holds a master’s degree in Economic Integration Processes from the University of Buenos Aires. She has been an international consultant on trade, integration and natural resources issues at ECLAC, Latin American Economic System (SELA), Institute for the Integration of Latin America and the Caribbean (INTAL), among others. She worked in the Andean Community between 1985 and 1994, and as an advisor to the Commission of Permanent Representatives of MERCOSUR between 2006 and 2008, and Economic Attaché of the Embassy of Peru in Argentina between 2010 and 2015. She is an analyst for the Americas Program for the Andean/Southern Cone region.

Footnotes

[1] According to the latest edition of the Social Panorama of Latin America report prepared by the Economic Commission for Latin America and the Caribbean (ECLAC), the wealthiest 1% of the country accumulated in 2017 26.5% of wealth, while that 50% of lower income households accessed only 2.1% of the country’s net wealth.

[2] According to the host of Prosur’s first presidential summit, Sebastián Piñera, it was about “creating a new reference in South America for better coordination, cooperation and regional integration, free of ideologies, open to all and 100% committed to the democracy and human rights.” The problem is that there are no ideology-free forums. Prosur is closely allied with the U.S. government and is an ideological response to the failure of Unasur in its attempt to autonomously solve the problems of the region.

[3] While a Chilean citizen has a 9% chance of seeing their income grow until they join 20% of the population with the highest income, they have a 16% chance of seeing their income decrease and fall into the 20% of the population in the lower income bracket.

[4] Kahhat Farid, “The eternal return, the radical right in the contemporary world”. https://elcomercio.pe/mundo/latinoamerica/la-paradoja-chilena-por-farid-kahhat-noticia/

[5] The pension system in Chile is provided by the Pension Fund Administrators (AFP), which are private financial institutions that are responsible for managing individual pension savings account funds.

[6] https://www.bbc.com/mundo/noticias-america-latina-50124583

[7] “The protests in Chile are from the First World”, Andrés Oppenheimer https://www.elnuevoherald.com/opinion-es/opin-col-blogs/andres-oppenheimer-es/article236564373.html

“The Chilean enigma”, Mario Vargas Llosa, https://www.losandes.com.ar/article/view?slug=el-enigma-chileno-por-mario-vargas-llosa-2

[8] https://www.dw.com/es/pi%C3%B1era-estamos-en-guerra-contra-un-enemigo-poderoso/a-50910426

[9] In January 2015, the binomial electoral system created by the Pinochet dictatorship was eliminated, which, in practice, favored the political right, which under this system controlled half of the Congress with one third of the votes .

[10] The Broad Front founded in 2017 is the exception. It is a Chilean political coalition made up of left-wing political parties and movements, egalitarian liberals and citizens who seek to overcome the dichotomy of Chilean bipartisanship, formed by the New Majority and Chile Vamos

[11] La violance des Riches, Michel Pinçon & Monique Pinçon-Charlot, Paris, 2014 https://www.youtube.com/watch?v=Ys3cjJlTcDE

[12] “We are absolutely overwhelmed, it is like a foreign invasion, alien (…) Please, keep calm, call people of good will, take advantage of rationing meals and we will have to decrease our privileges and share with others. (…) Friend, I think that the most important thing is to try to keep our heads cool, not to get overexcited, because what is coming is very, very, very serious.” “They moved up the curfew because it was known that the strategy is to break the entire food supply chain, even in some areas water, pharmacies. They tried to burn a hospital and tried to take the airport.”

[13] https://www.bbc.com/mundo/noticias-america-latina-50208871

[14] Between 2014 and 2017, both the right-wing political coalition (with the Penta Case and SQM) and Michelle Bachelet’s government (with the Caval case) were tainted by issues related to illegal financing of political campaigns and false ballots

[15] Days earlier, in an interview with Efe, the head of Latin America in the State Department, Michael Kozak, said that the United States had identified in the social networks “false accounts” from Russia that are trying to sow discord in the network. At the moment he has not mentioned a possible interference of Cuba or Venezuela in this country.

[16] https://www.cnnchile.com/pais/diplomacia-eeuu-cuentas-falsas-rusia-agitando-manifestaciones-chile_20191025/

[17] https://www.t13.cl/noticia/politica/prefiero-ser-prudente-ministro-blumel-se-desmarca-supuesta-intervencion-extranjera-chile

[18] https://www.bnamericas.com/es/noticias/comunicado-de-la-secretaria-general-de-la-oea-sobre-la-situacion-en-chile

[19] Statements by the Eastern Metropolitan Regional Prosecutor, Omar Mérida, said that the investigation he heads “has no precedents regarding specific identities or specific nationalities.”

[20] Héctor Barros, South Metropolitan Regional Prosecutor https://www.t13.cl/noticia/politica/prefiero-ser-prudente-ministro-blumel-se-desmarca-supuesta-intervencion-extranjera-chile

[21] Rubén Alvarado, general manager of the Metro de Santiago https://www.t13.cl/noticia/politica/prefiero-ser-prudente-ministro-blumel-se-desmarca-supuesta-intervencion-extranjera-chile

[22] http://www.noticiasser.pe/opinion/la-nacion-insurrecta-y-el-fin-de-los-tiempos

[23] https://www.dw.com/es/chile-es-el-cambio-de-la-constituci%C3%B3n-la-soluci%C3%B3n-a-la-crisis/a-51144077

[24] https://www.cnnchile.com/pais/celestino-aos-pidio-cambio-de-constitucion_20191108/

[25] https://www.theclinic.cl/2019/11/08/violacion-grave-a-los-derechos-humanos-onu-demanda-el-cese-inmediato-del-uso-de-balines-y-perdigones-en-chile/

[26] https://www.bnamericas.com/es/noticias/comunicado-de-la-secretaria-general-de-la-oea-sobre-la-situacion-en-chile

[27] https://www.cnnchile.com/pais/cidh-visita-chile-derechos-humanos_20191106/

[28] https://www.t13.cl/noticia/nacional/the-new-york-times-publica-reportaje-sobre-manifestantes-que-quedaran-ciegos-por-traumas-oculares

[29] https://rpp.pe/mundo/latinoamerica/crisis-en-chile-sebastian-pinera-es-denunciado-por-presuntos-crimenes-de-lesa-humanidad-en-protestas-sociales-noticia-1228713?ref=rpp

[30] The Communist Party did not participate and the Broad Front split.

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