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Chile braces for unrest forward of ballot on structure

Shopkeepers shut their windows and authorities moved to protect targets of possible vandalism as Chile on Sunday prepared to mark the anniversary of the outbreak of rioting and social unrest last year.

The milestone comes a week before a referendum on October 25 in which polls predict about two-thirds of Chileans will vote in favour of drawing up a new constitution. This was one of the central demands of protesters angered by issues such as rising prices, inequality, meagre pensions and poor public services.

Many hope that a second wave of protests — with unrest already intensifying over the past week — will not be as disruptive as in 2019. Then, widespread arson, looting and vandalism caused about $4.6bn in damage to public infrastructure.

“An electoral tsunami is coming that will channel [much of] the energy and hope for change through the electoral process,” said Eugenio Tironi, a sociologist in Santiago. He pointed to presidential, congressional, gubernatorial and local elections due next year, on top of another vote to appoint a constituent assembly if the majority votes in favour of a new constitution next Sunday.

Mr Tironi expects most demonstrations to be peaceful, even if a frustrated radical fringe poses a continuing threat. “If the constitutional process is seen as legitimate and backed by the different political groups, it will help to calm things down, but not among the small violent groups. They will continue for sure,” he added.

This is not a moment of extremism. Most Chileans just want a state that is more present

Claudia Heiss, head of political science at the University of Chile, says that Chilean society is moderate. “This is not a moment of extremism. Most Chileans just want a state that is more present.

“What is at stake is putting an end to neoliberalism and moving towards a social democratic model. This would be something radically different, but not in the sense of abolishing capitalism or private property rights.”

Not only is a radical shift to the left not supported by most Chileans, but there would be strict limits on the contents of a new constitution, since all articles would need to be approved by a two-thirds majority of the constituent assembly. Even so, “the demand for change should not be downplayed”, warned Ms Heiss.

Protesters say the current constitution — drawn up in 1980 by General Augusto Pinochet — does not protect human rights or social welfare, concentrates power within an elite, allows the private sector too much economic control, and lacks legitimacy because it was forced on the country by the military dictatorship.

“Drafting a new constitution in Chile is all about trying to put the legitimacy of the Chilean [political] system on a new footing,” said Andrés Velasco, a former finance minister in Chile who is now dean of the school of public policy at the London School of Economics.

While Chile can claim many successes in the past 30 years since the end of the Pinochet dictatorship, one of its greatest weaknesses is the credibility of its institutions and a lack of trust in the country’s elite.

“The conservative establishment in Chile fails to see that if we don’t do something about the legitimacy of institutions and the poor performance of our politics, the economy is not going to do well,” Mr Velasco said. 

But critics say that a new constitution itself will lack legitimacy, given that it will have been forced into being by social unrest just as the current one was imposed on the country by the Pinochet regime. 

Detractors add that, in addition to the uncertainty likely to keep investment at bay during the constitutional process, which could last two years, the new document could generate greater spending pressures — for instance, by expanding access to healthcare. This, they say, could undermine Chile’s famed fiscal discipline and raise debt levels. 

Last week, Fitch Ratings downgraded Chile’s sovereign debt from A to A-, arguing that public finances had been dented by demands to ramp up social spending after the 2019 protests, and undermined by the economic downturn caused by Covid-19. 

Fitch forecast that the government debt burden would rise to 34 per cent in 2020, up from 28 per cent in 2019. It would keep increasing, the rating agency predicted, given the challenges to reining in spending amid social pressures and lower growth prospects, with the economy expected to contract 5.8 per cent this year, largely because of Chile’s lockdown. It would rebound by 4.5 per cent in 2021, according to Fitch. 

Eduardo Engel, one of Chile’s most respected economists, says that the country’s level of debt is low enough not to be a major problem.

“If it is a good social contract, it should bring stability for decades to come, and that should help investment in the long term,” he said, adding that despite Chile’s economic success over the past three decades, it was time for a change, including a significant redistribution of power. 

“The goose had already stopped laying the golden eggs. Now we need a new one to come out of the constitutional process. We couldn’t continue as we were.” 

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