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The Dramatic Fall of Chile as Latin America’s Neoliberal Role Model

Photograph Source: B1mbo – CC BY-SA 4.0

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.

Loss of Leadership in the International Sphere

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]

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.

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.

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