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Mired in scandal, Chile's Bachelet plans Cabinet shakeup

Chile's President Bachelet to announce major Cabinet shakeup in midst of scandal

Chilean President Michelle Bachelet plans to announce a reshuffling of her Cabinet on Monday in a bid to restore her public image, which has been badly tarnished by corruption scandals, including one involving her son.

New ministers are expected to be announced even as the attorney general continues an investigation into an illegal campaign financing scheme that has touched the president’s allies. Separately, local prosecutors in southern Chile are investigating whether Bachelet's son, Sebastian Davalos, peddled influence and misused privileged information. Davolos was called to testify last month in the probe.

Chile’s first woman president, Bachelet was elected to a second term starting in March 2014 on the strength of her then-considerable personal prestige and an ambitious reform agenda, including a promise to push for a new constitution to replace one passed under the Pinochet dictatorship in the 1980s.

Bachelet was held captive by the military junta in the 1970s before going into exile. A pediatrician, she completed her first four-year term in 2010, then took a United Nations job after being succeeded by Sebastian Pinera. She won reelection in November 2013 in a landslide.

But recent controversies have seriously shaken Bachelet’s approval numbers, with one recent opinion poll conducted by the Chilean Center for Public Studies showing her favorability at just 29% of those polled, down from 80% when she left office in 2009.

Although she has managed to push through tax and education reforms during her first 14 months in office and has support from a majority of the Chilean congress, the uncertainty caused by the investigations has cast doubt over her other proposals, including the new constitution.

Bachelet announced last week that she was asking all ministers to resign and that some or all would be replaced. She chose an unusual forum to make the announcement -- a TV interview with Mario Kreutzberger, better known as Don Francisco, host of a popular Chilean variety show syndicated throughout Latin America.

“I thought it necessary to evaluate multiple things, from management to the new team that will accompany me in this new cycle to allow the reforms to be carried forward,” Bachelet told Kreutzberger in the May 6 interview.

She also acknowledged that “confidence in the presidential institution” has been compromised by the scandals, including “the issue involving my son and daughter-in-law.” Bachelet, who is divorced, had named her son “sociocultural director,” a post with functions similar to those filled in the United States by the first lady.

The scandal dubbed “Nuera-Gate” -- nuera being the Spanish word for daughter-in-law -- broke open in February after it became known that Davalos and his wife, Natalia Compagnon, met with Banco de Chile Vice President Andronico Luksic just prior to the presidential voting and asked for a $10-million loan for Compagnon’s real estate business.

The loan was approved the day after Bachelet’s victory in December 2013, and the money was used to buy rural land in southern Chile that later appreciated in value because of a plan to change the agricultural zoning to commercial to accommodate a huge new housing development. Compagnon later sold the land for $15 million, according to an investigation.

That the Davoloses went outside the bank’s normal channels to seek the loan by meeting with Luksic, who is among Chile’s wealthiest businessmen, has raised suspicions of influence peddling. Luksic’s fortune is estimated at $14.1 billion by Forbes magazine. Davalos resigned his presidential post in February.

Prosecutors in Machali in southern Chile, where the land is located, have opened a probe to see whether the couple used inside information of future development to make the investment. Davolos was called to testify there in April.

The investigation by the attorney general into illegal campaign financing involves an alleged scheme by which candidates received campaign contributions disguised as fees for services that were never rendered to the companies making the payments.

One of the companies that allegedly made illegal payments is SQM, which was headed for 28 years by Pinochet’s former son-in-law, Julio Ponce Lerou. Amid the uproar, Ponce announced in April he would step down as company president.

Among the politicians reportedly being investigated in connection with the illegal payments is Bachelet’s current interior minister, Rodrigo Peñailillo, who has denied that payments he received in 2012 were bogus, insisting he performed real services.

Special correspondent Poblete is based in Santiago. Special correspondent Chris Kraul contributed to this report.

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