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On November 10, a 6.9 magnitude earthquake shook Chile. It came just under two months after a larger earthquake, with a magnitude of 8.4, devastated the country’s central region. In light of a tsunami warning after the first quake, Chilean President Michelle Bachelet ordered the evacuation of one million people from the coastline between the northern city of Arica and the southern city Puerto Aysén and formally declared the area a disaster zone. All in all, 13 people died. The government estimates that as many as 3,000 homes were destroyed.
It is a bitter truth that the earthquakes have hit Chile in the middle of the strongest political, economic, and social shocks the country has seen in many years. Facing corruption allegations and historically low approval ratings, and unable to move forward on crucial reforms at her planned pace, Bachelet is undergoing her most difficult moments as president. Some have already written off her presidency as a wasted opportunity. She has roughly two years left to try and prove her critics wrong.
In December 2013, Bachelet, who promised far-reaching reform, won the presidential election with 62 percent of the vote. After almost two years in charge, though, that support has drained away. According to the public opinion institute GFK Adimark Chile, Bachelet’s approval rate reached a historic low of 24 percent in August 2015. That month, her center–left coalition government had an approval rating of a mere 16 percent. The only group that fared worse was the center–right opposition Alianza, with 15 percent. The fact that Chile’s two leading political factions, which currently dominate national politics, have a combined approval rating of only 31 percent signals a deep crisis within the political class.
Part of the problem is the sluggish economy Bachelet inherited from her predecessor. Some politicians would have waited to commence necessary reforms until the economy looked healthier, but Bachelet did not. The goal of her reform agenda was to introduce a progressive tax system that no longer favored companies over individuals (as the existing system had done) and that would collect more money (up to three percent of GDP) to finance educational reforms and provide free schooling for all. In turn, these measures were expected to put the economy on a sounder footing for the long term. Free education would reduce social tensions, and better educated professionals would push up Chile’s productivity rate. Those factors, in turn, would lead to more foreign investment. The reforms passed, and await implementation.
Over time, however, the public soured on the measures. It isn’t that Chileans disagree with the goals—they believe that reducing inequality and improving the educational system should be among the government’s top priorities—but they no longer think that the reforms will work. In particular, they see the economy’s low growth as a barrier, and a critical media campaign from the right-wing parties has taken its toll.
Something similar has happened regarding labor reform, which has been on the agenda since the start of the year. In January 2015, Bachelet proposed a law to further strengthen unions and protect wages and unemployment benefits. According to polls, 53 percent of Chileans approved of the plans. Half a year later, by August, only 31 percent did. Here, timing seems to be key once again. In an interview with El País on 28 May, Bachelet argued for a slow approach: “Sometimes you have to conduct policies that change cultures and modify existing situations. It’s not about keeping everything the way it was, because progress would be impossible that way. But when change is effected, you need to give it enough time, or make it gradual to ensure that the process will not be dramatic.” The problem is that Chileans probably won’t see returns from the reforms until 2016 at the earliest, and public opinion isn’t usually that patient.
Overall, Bachelet’s plans are ambitious, and she’s not unrealistic to expect the process to be drawn out and the payoff to take time. Fixing the tax code would be an important step to mitigate social inequality in one of the world’s most unequal nations. And making education free would be an enormous boon to the citizens of a country with some of the highest tuitions compared to incomes in the world, and would especially help the poor who cannot currently afford an education. But having raised expectations about those reforms during her campaign, Bachelet could sink her own political career and bury reform efforts for years if she doesn’t deliver.
For her part, Bachelet has tried to shift the blame for her government’s problems elsewhere. She and other members of her coalition have frequently made reference to a “terror campaign” against the reforms, in particular against the educational reform. During an international entrepreneurial meeting called “Investing in Chile” in October 2014, for example, Bachelet said, “we have seen ads against the educational reform in newspapers, on the radio, and on street posters. These are not free, but paid ads.” She continued, “they are saying that the government will close schools, which is completely false; they are saying that in the future parents will not be able to choose the school of their children, which is also false.”
It is true however that there has been significant discussion of the education proposals in major media outlets, which are mostly controlled by the richest family conglomerates. In early 2014 the right-wing opposition party Independent Democratic Union (UDI) started a campaign called “Telling the Truth” with the aim of informing citizens about its concerns about the reforms. Among other things, the ads raised the specter of the end of private education and of parents’ choice about where they send their kids to study. They also highlighted concerns about the poor quality of public education. According to party members from the UDI, the main drivers behind the anti-governmental pamphlets were Felipe Ward, former party leader, and Rodrigo Pinochet, the grandson of former dictator Augusto Pinochet and coordinator of the “Telling the Truth” project.
One pamphlet from the UDI asks Chilean citizens whether they are willing to “pay for the education of the children of ministers, great entrepreneurs, judges, managers, or the rest of the RICHEST Chileans?” Whether they know “why the GREAT ENTREPRENEURS are in favor of the tax increase? The great entrepreneurs don’t stop at making profits. The tax rise will be paid for by you: by middle class Chileans.”
Given that Bachelet’s original (and official) proposal for tax reform was about reducing the tax burden for individuals, particularly poorer and middle class individuals, and raising it for companies and for Chile’s richest, the facts as rendered by this information campaign seem reversed. Ward openly admitted that the campaign was “about provocation.”
As for other criticism in the media, it is worth noting that most owners of the big mainstream media companies and the leading figures of Chile’s think tanks and public opinion-making institutes are in many cases co-owners of and stakeholders of big companies (for example, in the mining, agriculture, education, and banking sectors). It is thus only natural that they oppose Bachelet’s reforms, which would significantly increase their tax burden. Although criticism about the speed, transparency, and clarity of the reforms is legitimate (and correctly reflects public opinion), other aspects of the anti-reform campaign seem merely to protect the interests of the upper classes.
To be sure, Bachelet does share some blame for the confusion among citizens. For one, to describe an advertising campaign as “terrorism” is irresponsible. In addition, her government has tended to present the reforms as inevitable and non-negotiable right from the start. With her parliamentary majority, Bachelet expedited approval of the measures without negotiating them with the opposition, nor, more importantly, taking the time to communicate pertinent details about them to the broader public.
Even the parties of Bachelet’s left-wing New Majority coalition repeatedly complained about the lack of dialogue and the limited details released in advance of the presentation of the bill to the broader Congress. This marks an important difference with Bachelet’s first term (2006–10), in which she sought, where possible, to create consensus within the governing coalition and the representatives of different political parties. She was criticized during her first term for unending rounds of dialogue to define laws; now she is blamed for eschewing it altogether.
It is precisely the lack of detailed day-to-day communication and the resulting uncertainty about the potential effects of the reforms that, some entrepreneurs have argued, caused a lack of new investment and low growth rate. But that explanation isn’t entirely satisfactory either. Chile’s export economy, like many others, is facing tough circumstances because of external and internal problems. Chile, for its part, is too dependent on resource extraction, particularly of copper. Meanwhile, the Chinese economy has weakened (China is Chile’s principal trading partner and the largest consumer of Chilean copper) and global mineral prices have fallen. Domestically, as a result employment and consumption have fallen, and projected inflation has risen. In September 2014, Chile’s projected GDP growth for 2015–16 was estimated at 3.6 percent, by the summer of 2015 this number had been cut to 2.5 percent. These issues weren’t caused by Bachelet’s efforts to reform, but they will make reform more difficult.
Corruption is also a thorn in Bachelet’s side. According to the Corruption Perceptions Index published by Transparency International, Chile is the least corrupt country in South America. Not only that, at 21 out of 174 countries in the 2014 rankings, it even stood above some European countries (Austria was 23rd, France 26th, Portugal 31st, Poland 35th, and Spain 37th). But the February 2015 revelation of scandals involving both right- and left-wing parties changed public perception on the issue.
In one particularly embarrassing case, Bachelet’s son, Sebastián Dávalos, who was director of the Presidential Office of Socio-Cultural Affairs, had allegedly helped the export and management company Caval Limitada, which is co-owned by his wife Natalia Compagnon, obtain a credit of more than $10 million from Banco de Chile. The plan was to buy rural territory in Machalí and transform it into an urban area, thus multiplying its value. As the observer Juan de Onis rightly wrote in an earlier article on the case in Foreign Affairs, the eventual disclosure of the deal “badly damaged Bachelet’s self-styled image as a benign and motherly benefactor of the poor, far removed from the wiles of Chile’s wealthy upper class.”
Although Bachelet was not personally involved in this scandal, many Chileans continue to not believe that she didn’t know about the deal. After the revelations, her approval rating fell steadily. Although 56 percent of Chileans still thought of Bachelet as a “credible person” in February 2015, this number had dipped to 36 percent as of August.
There were two other major scandals in 2015. The first revealed that Julio Ponce Lerou, son-in-law of former dictator Augusto Pinochet who heads the multinational chemical company Soquimich, had illegally financed numerous candidates of all political stripes since 2010. These included the right-wing parties that belong to Alianza as well as the Socialist, Popular Democratic, Radical, and Christian Democratic parties of the leftist coalition New Majority.
It was unclear what, precisely, the dictator’s son-in-law intended with such undifferentiated financing, although some believe that he wanted to ensure that remnants of the dictatorship would maintain some influence, a speculation that he didn’t confirm. The other question was the exact role of Bachelet. Again, she was not personally accused of corruption or receipt of illegal funds in the Soquimichcase, but close members of her coalition were.
Another scandal dates back to October 2014, but is still at the center of public discourse. It is also tied to former supporters of the military regime, who today own the investment bank and holding company Penta. Four Penta executives allegedly helped finance the right-wing Independent Democratic Union, part of the opposition coalition Alianza of former President Sebastián Piñera. Although the opposition was implicated in this case, both charges contributed to public wariness about traditional politics in general.
In the face of so many problems, Bachelet has recently redefined her reform program as “realism without renouncement” (realismo sin renuncia), an expression that was immediate cause for another fierce debate. For Bachelet, the slogan is merely a reference to the need to adapt the reforms to the country’s new realities. “We find ourselves in a moment of economic restrictions. The predictions on which our governmental (reform) program were based have undoubtedly shifted. We have 32 months left in charge. Let’s reconsider all we want to achieve: What can be accomplished in this timeframe? What are the most important tasks? What is unavoidable? We have to define a preference list and a scale of importance.” In a compromise criticized by many, foremost by her voters, Bachelet now wants to prioritize free education for only part of the student population. She cut the budget for the reform program because of the lack of money generated by the decline of the price of copper and the poor growth of the economy that led to lower income from taxation.
For the right-wing opposition, the president’s new motto is nothing less than the coming to fruition of a self-fulfilling prophecy: the impossibility of profound and encompassing societal change within a short timeframe. Likewise, for some of the president’s own coalition partners, it is an admission of failure. This will be problematic for Bachelet since, perhaps even more than misinformation campaigns and global economic realities, it is the lack of political consensus within her own coalition and between the two big party alliances that is stymieing her reforms.
For Bachelet’s remaining time in office (the next general and presidential elections will be in November 2017), the outlook isn’t great. Overall, Chile is in for hard times, during which natural catastrophes will be a minor factor of the country’s woes. According to national authorities, the cleanup after the recent earthquakes will require just a few months—not unusual in a nation that has long learned to live with such calamities. But Bachelet also has political disasters to clean up, which means, first, regaining consensus for her reform program by readjusting her public image and that of politics in the Andean nation in general. She will have to reaffirm the pace and ambitions of her agenda and dedicate more time to communicating her plans to her parliamentarians, the opposition, and, most important of all, the voters. Since inequality—between the rich and the poor, the empowered and those left behind—will remain the most critical issue in Chile in the coming decade, Bachelet’s performance will be measured by its growth or mitigation.
And the outlook? Chile will most likely remain one of the most unequal nations in the world, while trying—as few other OECD members have done with similar courage—to change that. This will make it the most interesting, if not exemplary, case study of socio-political transformation in our time. As for Bachelet, there are more doubts than certainties ahead. The only thing that is certain is that she will be out of politics after finishing her second term; Bachelet herself has announced that this will be her last stint in office. Hopefully that decision will liberate her to enact what is best for the country with greater conviction and determination and with more balanced bipartisan participation until the next presidential elections in 2017.