The Dialogue hosted a wide-ranging discussion on the significance and implications of Chile’s run-off presidential elections of January 17th between Sebastian Piñera of the Alianza por Chile coalition and Eduardo Frei of the Concertación.
The session, which took place on Wednesday, January 20, from 8:30 to 10:00 a.m. at the Inter-American Dialogue, featured Genaro Arriagada, one of Chile’s leading political figures and analysts. Arriagada shared his thoughts on the outcome and looked ahead to the central political, economic and foreign policy challenges that face the next government.
Arriagada served as minister of the presidency, Chile’s ambassador to the United States, and national director of the “NO” campaign that defeated General Augusto Pinochet in the 1988 plebiscite. He is currently a Dialogue non-resident senior fellow.
Arriagada: Chile May See Tax Hikes, Labor Reforms Under Pinera
By Matthew Schewel
WASHINGTON—Sebastian Pinera will be Chile's first right-leaning president since its return to democracy in 1990, but the billionaire businessman is not likely to change the economic policies of his center-left predecessors, except for a few "minor adjustments" which could include tax hikes and labor market reforms, former Chilean diplomat Genaro Arriagada said Wednesday.
Pinera's victory over former President Eduardo Frei in Sunday's presidential runoff marked the end of two decades of rule by the Concertacion, the coalition of center-left parties that oversaw the opening of Chile's economy and a vast expansion of its middle class. Pinera, who obtained 51.6 percent of the vote, has promised to boost economic growth—it waned under successive Concertacion presidents—and improve social services in the areas of health, education and public safety.
But to fulfill those promises, Pinera may have little choice but to raise taxes, said Arriagada, who headed Frei's successful campaign for president in 1993. "There is not much room to increase these three things through better management," Arriagada told an audience at the Inter-American Dialogue, where he is a senior fellow.
At 18 percent, Chile's tax burden is relatively low compared to that of more developed nations, noted Arriagada, who belongs to the Christian Democratic Party, a member of the Concertacion. "I think with 18 percent you cannot have the state that Pinera, Frei, everyone was promising," he said.
Pinera may also push to deregulate Chile's labor markets, which business leaders say is necessary to increase productivity. Such efforts, which would set up a clash between the government and labor unions, would be unlikely to pass the legislature, where Pinera's Alianza por Chile coalition lacks a majority, Arriagada said. Labor-market deregulation tops the conservative agenda of the far-right Independent Democrat Union, which holds a majority of the Alianza's seats in the lower house. But Arriagada said the fear of losing the presidency after only four years is likely to have a moderating effect on the Alianza. "They have a lot of concern that they’ll only be there for four years. They want to behave properly," he said.
According to Arriagada, one of Pinera's greatest challenges may be alleviating public concerns about his billionaire background. Chile's third-richest citizen according to Forbes magazine, Pinera controls a major television channel and owns stakes in LAN Airlines and Chile's most popular soccer team.
After his electoral triumph, the market value of Pinera's principal holding company surged based on earlier promises that he would sell its 26-percent stake in LAN before taking office March 11. Pinera risks losing public confidence if he doesn't immediately resolve these conflicts of interest, Arriagada said. He added it would be a mistake for Pinera to use his links to powerful business and media interests to push his legislative agenda through Congress without negotiating with the Concertacion.
While Pinera's election opens a new chapter in Chilean democracy, it also ushers in a new period of crisis and soul-searching for the defeated Concertacion and its constituent parties. Among the coalition's mistakes, according to Arriagada, were choosing a former president as its candidate and shunning an internal primary, which launched the candidacy of Marco Enriquez-Ominami, who won over 20 percent of the first-round vote on a platform of a new leadership. In the days ahead, Chilean politics is likely to see a "realignment" of the left to include dissidents led by Enriquez-Ominami, Arriagada said.
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Pinera's victory over former President Eduardo Frei in Sunday's presidential runoff marked the end of two decades of rule by the Concertacion, the coalition of center-left parties that oversaw the opening of Chile's economy and a vast expansion of its middle class. Pinera, who obtained 51.6 percent of the vote, has promised to boost economic growth—it waned under successive Concertacion presidents—and improve social services in the areas of health, education and public safety.