by David Butler
It is a rather remarkable sign of a country’s recovery that the daughter of a victim of the former military regime and the daughter of a member of the former military regime can face off against each other in a peace, fair and free election.
So it was in Chile on Sunday. As the votes were came in, the centre-left candidate for president, former president Michele Bachelet was brought to be brink of victory with 47% of the vote. She will face Evelyn Matthei, who got 25%, in the second round but this is little more than a formality at this stage. Her Nueva Mayoria (New Majority) coalition have won 65 seats in the lower house (with 95% of the vote counted) on the brink of the four-sevenths majority need to enact major policy reforms. This electoral victory and the progress that occurred under twenty years of centre-left rule by Concertacion are worth celebrating.
Chile’s GDP per capita was both higher and grew quicker than the Latin American average for the most of the period of between 1990 and 2010. Obviously not all responsibility belongs to the centre-left government, but they proved themselves good stewards of the economy and invested in areas neglected by the Pinochet dictatorship. Chile was not badly affected the wave of recessions sweeping the world in the late 2000s, thanks to measures taken by Ms Bachelet.
The unemployment rate under Concertacion varied between 6 and 9% for most of the period. Whilst the recession saw a spike up to 11%, the rate has dropped rapidly to its current level of 6%. Inflation has generally remained within the central bank’s target range of 2-4%, ensuring that people enjoy price stability. Yet, there are challenges that remain: the weakness of physical infrastructure and the need for economic diversification away from the copper exports as a fuel of growth are headaches that need to be soothed in the medium-term.
As noted above, the Chilean economy is relatively dependent upon copper, which make up three-quarter of their exports. A sharp fall in the price in 2008 caused this sector to shrink in values. However, the centre-left government had invested in assets using revenues from the cooper boom in the early 2000s and were able to moderate the impact of the downturn. A truly counter-cycle fiscal policy almost unique amongst commodity exporting countries, according professor Jeffrey Frankel of Harvard university. This is has ensure that Chile’s public debt remains at a manageable 9.5% of GDP. Bachelet herself introduced a fiscal responsibility bill in 2006 to further enshrine principles on which this prudence was based. Despite this fiscal conservatism, the governments of Concertacion were able to raise spending on social security and education.
