Next Tuesday, March 11, the new coalition under leadership of Michelle Bachelet’s Socialist Party is going to officially take over government business. Thus, outgoing President Sebastián Piñera has been busy to defend his legacy lately. From the viewpoint of Chile’s former Pinochet-parties Mr. Piñera has earned his place in history. He was the first leader to bring right-wing parties back to power since democracy returned in 1989. Although Mr. Piñera’s honeymoon with the public ended abruptly after the buzz about the trapped miners (‘Los 33) toned down and furthermore the radical elements of the right-wing (mostly descends?? Of Pinochet and his lackays) began to accuse himof destroying the right’s legacy; and although he exhibited an unintended Charlie Chaplin-esque clumsiness in Chile (legendary mocked as ‘piñericosas’), as well as outside his government was actually not a total disaster.
His main achievement, I’d say, is electoral reform. Before the reform it was mandatory to vote, once citizens registered in an electoral directory. To register onself, however, was voluntary. Thus a situation arose, in which many especially young people refrained from registering and thus voting, so as to avoid possible future sanctions for not (being able to) vote. Piñera’s own party, while in opposition, repeatedly blocked attempts on reform, so his government’s move should be seen strategically, not idealistically. Nonetheless, he pushed for reform, although it was quite clear that increased voter turnout would result in likely losses for his political bloc– and losing they did. In the 2012 Municipal Elections nearly all right-wing mayors of Santiago’s numerous suburbs – even hitherto long-term office holders such as Providencia’s Cristián Labbé, who served as torturer under Pinochet, and who has shown nothing but contempt for his victims ever since – lost their seat. Mr. Piñera’s gamble might not have paid off in the short term. Yet, I think he knew reform was the right thing to do to strengthen democracy. His party might feast on this reform in future elections – especially if Chile’s middle class continues to grow.
Economically, his government has much to show indeed, although some of the developments are bound to implode. First of all, Mr. Piñera raised the minimum wage two times in just three years, from 180000 Chilean peso to now 250.000 peso. In some parts of the world, Germany for example, such measures are still seen as pure communism! (Although the German government, after years of tenacious and ridiculous debate and scare campaigns, now implemented something like a minimum wage). Anyway, Mr. Piñera’s minimum wage still falls very short of the opposition’s demand (350.000 peso), and as with electoral reform, such wage hikes have been opposed when in opposition, his party nevertheless can claim credibility for taking care of the workers. The minimum wage hikes sparked a general feeling among the population that the country is progressing – and this is also quite an achievement, no matter the motives and actual popularity. These hikes were justified with the improvement of Chile’s economy. They are an attempt to include the lower middle class into the shopping spree Chilean society embarked on some four years ago. And this is precisely what must be put on the negative side.
The cynicism in the wage hikes lies in the fact that they are still too low to pay for flat-screens and fancy gadgets – exactly the things that Chileans are buying at the moment. They nevertheless provide strong enough a foundation to expand consumer credit. Chile’s boom is based on such credit. Some of my students found credit cards loaded with up to 5.000.000 Chilean peso in their mail, although they never asked for it, let alone being customers of the issuing bank. It is common nowadays to pay even relatively little amounts in instalments. These instalments (‘quotas’) carry very high interest rates, which are not always made transparent, and when they are many Chileans are not able to calculate them, due to the dismal education system here. As such, nothing is really paid for. Everyone pays their loans with more loans. In the short-term this consumer craze created lots of jobs, especially for unskilled people in retail and marketing (cold calling, door to door sales, etc.). These are in the main the about 1 million jobs Mr. Piñera’s government created. This is the foundation of the 5%-6% p.a. growth rates. It is not hard to see that this shaky foundation is bound to crumble at some point. Not even the inflation under control, as claimed by Minister of the Treasury Felipe Larraín, won’t help alleviate the debt burden. Given that private bankruptcy is not possible, coupled with a very loose social security net and employee’s protection almost non-apparent, many people will fall back into enduring poverty once the economy cools down, as it does already. The blame, it is my conviction, will be shifted to the Socialist government. Sure, every government will also be judged regarding crisis management, so interesting times are lying ahead.
Mr. Piñera’s economic miracle will then be remembered as a scam, almost everybody fell for. His legacy so far is giving the country back a ‘can do’ attitude. And this is much more than many expected after his first year in office.