Bachelet May 21: State of the Nation
The president of Chile, Michelle Bachelet, delivered her second state-of-the-nation address on May 21st amid sharply declining popularity and early signs of a shake-up in the political forces that make up the governing coalition.
Image: “Bachelet Puppet of the Economy”
Small intelligence of Chile’s Government
The initial optimism about the new administration, along with the healthy performance of the Chilean economy, have been overshadowed over the last year by growing popular demands and more discontent with Bachelet’s governance. She made some concessions in her annual speech, in particular promising to loosen the public purse strings, and she may have the opportunity to recover somewhat in her approval ratings. But there is also a risk that her administration will continue to be fraught with conflict.
Ms Bachelet’s troubles were highlighted in mid-May when a group of Chilean legislators in the ruling centre-left Concertación Democrática (Concertación) coalition sent her a letter calling for the government to take a decisive turn to the left in policy. The letter was signed by almost 20 legislators representing all four parties in the coalition, which has been in power since the return of Chile to democracy in 1990.
Many legislators are concerned that economic policy is too conservative, and that as a result Chile did not benefit in 2006, in terms of economic growth, as much it would have been expected to from record prices for copper. Popular support for the government, as a result, is declining.
Although this complaint has become a rallying cry for the left, the reality is slightly different. A fiscal stabilisation rule mandates that the central government structural surplus is kept at 1% of GDP, and this has helped to smooth volatility in GDP growth, meaning that the economy does not suffer so much in years of low copper prices, and equally does not boom so much when copper prices are high, as in recent years. Over the medium term, this is a good thing, as Chile has maintained a record of solid and stable economic growth under its fiscal policy. But it is starting to bring a political cost.
The letter comes at the end of a difficult few months for the Bachelet administration, which has been stung by the disastrous launch in February 2007 of Transantiago, an integrated transport system for the capital, Santiago, and by strikes in mid-2006 by students and others demanding more money and reforms to the lagging public education system.
Bachelet Agenda:
In this environment, Ms Bachelet used the annual presidential address to relaunch her administration and her agenda. Her speech last year was criticised for failing to mention problems in the education system, and days later nationwide student strikes erupted, which later triggered the first major cabinet reshuffle of her administration (a second round of cabinet changes followed the Transantiago crisis).
- Still, a year ago the president’s popularity rating remained high at around 66%.
- At present, by contrast, more Chileans disapprove of her performance (46%) than approve of it (40%), according to a poll released on May 18th 2007.
With many Chileans now questioning the economic model followed by the Concertación, Ms Bachelet has pledged to spend more of the country’s copper windfall on social projects and to boost growth.
The fiscal rule has been halved from 1% to 0.5%.
This is in response to months of pressure from politicians on all sides, as well as many economic analysts who believed the 1% rule was too restrictive.
The change effectively releases extra funds for social investment. US$650m has been promised for education in 2007, bringing the education budget to more than US$5bn, with an emphasis on:
- primary education and computerisation.
There will also be an increase in health spending to allow for 80 ailments to be covered under the AUGE plan (from 56 currently), a programme that grants Chileans free or low-cost treatment for eligible illnesses.
Although promising that transport fares would not go up until Transantiago is functioning normally, Ms Bachelet said little else about the Transantiago fiasco, or a recent public financing scandal (Chiledeportes) that has plagued the government.
Transantiago Chile, Documentos Relativos a esta Información:
Transantiago Chile · Publicación: Presidenta de Chile Michelle Bachelet
