Chile’s love for Bachelet goes only so far

An overwhelming majority of Chileans are happy with President Michelle Bachelet, grateful for the social safety net she has extended to women and the poor, and optimistic about the future.

Then why did Eduardo Frei, the candidate for her ruling center-left Concertacion coalition, fare so poorly in Sunday’s presidential election, finishing a distant second to right-wing billionaire businessman Sebastian Pinera in the first round of voting?

For all the social progress under Bachelet, who leaves office in March because she is limited to one term under the constitution, there is dissatisfaction over Chile’s economy and educational system. The country’s blistering, export-driven growth jag of the 1990s has run out of steam, and Pinera’s campaign promise of a more entrepreneurial approachresonated with voters.

“Pinera made people think he can more effectively deal with the problems of the future,” said Harald Beyer, a UCLA-educated economist with the Center for Public Studies think tank in Santiago, the capital. Pinera, part-owner of the airline LAN Chile, also made people wonder whether Chile can afford a welfare state when it isn’t rich, Beyer said.

Since Augusto Pinochet’s military dictatorship ended in 1990, the Concertacion coalition has run Chile. But on Sunday, Frei garnered only 30% of the votes and Pinera got 44%. The men will face each other in a runoff Jan. 17.

Though the remainder of Sunday’s votes went to socialist and communist candidates, handicappers here say the political winds favor Pinera.

Under Bachelet, Chile made enormous social strides. She extended pensions to an additional 2 million Chileans, including, for the first time, homemakers. She completed the institution of universal healthcare, a policy begun by her predecessor, Ricardo Lagos. She quadrupled the number of government-run day-care centers to 4,200 and granted government-subsidized mortgages to tens of thousands of impoverished Chileans.

Those accomplishments are the basis for her 79% approval rating.

“Bachelet’s strong point was social policy. Her performance did a lot to legitimize the place of women in Chilean politics,” said Andres Palma, an economist at Flacso, another Santiago think tank.

But the global economic crisis has hit Chile hard, shining a light on the economy’s inadequacies in innovation, education, industrial diversification and productivity. Pinera, who made Forbes magazine’s list of the world’s richest people, promised voters that he would do something about it

During much of the 1990s, Chile’s economy averaged annual growth of 7.8%, earning it the title of Latin America’s most turbocharged. Leaders entertained dreams of someday matching the affluence of Portugal, a country that is the poorest and thus the most easy to catch up with among First World countries.

That growth was fueled by free-trade agreements with 56 countries that opened markets to Chile’s natural resources such as copper and timber, and to food items such as fruit, fish and wine.

But despite the global commodities boom, growth has slowed this decade to half what it was in the 1990s, to an average of 3.7%. The economic expansion is no longer keeping pace with the growth of the labor force. Far from catching up to Portugal’s economic output of about $23,000 per capita, Chile’s remains at $14,000, Beyer said.

And its income inequality is among the worst anywhere. Women can get welfare but few can get a job, according to data that show the nation ranks near the bottom among Latin American countries in formal employment, Beyer said.

Adding 2 million people to the pension rolls cost $1.7 billion and knocked 1% off the nation’s output of goods and services this year, Flacso’s Palma said, resulting in fewer jobs and lower consumption.

Though he promises to maintain the social programs started or expanded by Bachelet, Pinera says he’ll make them more efficient. In an interview, Catholic University economist and Pinera advisor Felipe Larrain said a government study showed that 86% of welfare programs were so wasteful they were in need of major adjustments.

Pinera also made industrialization of Chile’s economy a major goal. One of the more alarming statistics his campaign seized upon was a sharp decline in productivity and innovation, a result of insufficient investment by industry in research and development, Beyer said.

Sebastian Edwards, a Chilean who was the World Bank’s chief Latin America economist and now is a professor at UCLA’s Anderson School, said a big challenge is improving the dismal quality of Chile’s education system, another promise Pinera made to voters.

An educational revolution will require increased budgets, changing curricula and “wrestling power away from teachers unions, something Concertacion presidents over the last 20 years have been unwilling to do,” Edwards said.

Beyer said the education woes show up in the Chilean labor force’s low skill level. Forty-five percent of workers have not finished high school. On-the-job training is minimal because companies have few incentives to pay for it, he said. The dearth of training impairs the nation’s ability to compete globally, he said.

Although high school enrollment has gone up in recent years, the government is still investing too little in education, Beyer said, committing funds equivalent to 4% of economic output. That’s 25% less than the average among developed nations that participated in a recent international survey, he said.

Kraul is a special correspondent.