When Chile’s social unrest exploded last month, a saying started to do the rounds to express the significance of what was happening: “Neo-liberalism was born in Chile and it will die in Chile.”
The process to create a new constitution announced on Friday last week might go some way to assuaging the grievances that were aired on the streets of towns and cities the length of Chile.
However, if politicians are to have any hope of securing longer-term stability, they will need to address the inequality that lies at the heart of the troubles.
Whether neo-liberal, market friendly or simply encouraging of business, the policies under which Chile has become South America’s wealthiest nation are now about to change, perhaps radically.
What comes next will be closely watched to see whether it offers a new model for greater equality and economic growth at a time of widespread unrest across the region.
“This is a moment for Chile to chart out a new terrain,” said Jennifer Pribble, an associate professor of political science at the University of Richmond in Virginia. “It’s a tall task, but this initial political response could lay the groundwork to renegotiate a new kind of development model that constitutes a third way in the Latin American context.”
Under the accord, Chile is to hold a referendum in April next year to decide which body draws up the constitution. Whichever body is chosen would have nine months to write up the charter that will then be put back to voters.
The agreement is a major step toward solving a social crisis that has shaken the nation for the past month. What started as a protest against a 30 Chilean peso (US$0.04) rise in subway fares on Oct. 18 quickly snowballed into the biggest social unrest Chile has seen since the end of then-Chilean president Augusto Pinochet’s dictatorship in 1990.
Demonstrators want a complete overhaul of Chile’s free-market system designed by US-trained economists — the so-called Chicago Boys — during the dictatorship. Demands encompass everything from education, pensions, healthcare, wages, utility bills and even road tolls.
The constitutional process “will go a long way to calm the social unrest, but it is not enough,” said Claudio Fuentes, a political scientist and professor at Universidad Diego Portales in Santiago, adding that the agreement “opens the door to advance in other issues.”
Chilean President Sebastian Pinera’s center-right administration has started the process.
Last week, newly appointed Chilean Minister of Finance Ignacio Briones presented a bill to reform the tax system, saying that it was targeting the wealth of the “super-rich.”
Just two years earlier, Pinera had won election on pledges to cut taxes for the rich and boost economic growth. Those promises are now a distant memory.
The government has also unveiled a US$1.2 billion social agenda that includes a 20 percent increase to the minimum pension, a new minimum income set at 350,000 pesos, a reformed funding model for the public healthcare system and a freeze of utility prices.
However, the government has a mountain to climb over inequality after 40 years of unfettered free-market growth. Chile is the most unequal member of the 36-member Organisation for Economic Co-operation and Development.
Chile might be the wealthiest nation in South America, but the average monthly income is 574,000 pesos, Chilean National Statistics Institute data showed. The median income, the midpoint of all salaries, is a mere 400,000 pesos.
Debts often dwarf people’s wages, with 4.6 million Chileans, one-fourth of the population, late on payments, a Universidad San Sebastian study found earlier this year.
The average overdue debt is 1.75 million pesos and could explain why a government bill allowing debtors to delay payments has been called inadequate by many.
“Pinera is pushing for meager bonuses for the most vulnerable individuals,” said Diego Ibanez, a lawmaker with the left-wing Frente Amplio coalition of parties. “We demand true redistribution of wealth, with taxes for the super-rich to fund universal social rights.”
The transition from free-market poster child to a new caring, welfare state will not be easy, particularly for Chile’s president — a member of the super-rich.
The billionaire businessman-turned-politician is now Chile’s most unpopular president since the return to the democracy, pollster Cadem said.
He exhausted much of his political capital at the start of the demonstrations when he declared “war” on the protesters and called on Chileans to choose sides.
He backtracked within days and apologized, but it is hard for many Chileans to accept his new caring, compassionate note.
No march goes by without calls for his resignation.
“Pinera has mismanaged this crisis from the very beginning,” Pribble said. “Him taking distance now could help boost the legitimacy of the accord in the eyes of the protesters.”
Chile’s politicians now have months and years of hard work ahead of them to overhaul the system and placate protesters, without destroying growth.
On the streets, the capital, Santiago, is already a different city. Daily commutes have become a nightmare after dozens of metro stations and buses were burned and vandalized. Walls are covered in graffiti with protest slogans, and shops and banks are shielded behind thick metal and wooden panels to avoid looting.
As of evening on Friday last week, the panels remained in place. The transformation is only just beginning.
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