Mr. Piñera's former finance minister Felipe Larraín pointed out: Chile is no longer
a destination for capital. By the end of 2017, “investment will have fallen . . .
for four consecutive years, the worst performance of our country in at least
half a century, and this without any external recession,”...
Chileans voted on Sunday in a runoff presidential election that was arguably the nation's most important vote since the 1990 return to democracy.
Center-right former President Sebastián Piñera, of the “Let's Go Chile” coalition, ran on a platform to deepen market reforms and restore economic growth. Leftist Sen. Alejandro Guillier, candidate for the socialist “New Majority” coalition, promised to put social justice and government intervention in the economy above individual liberty.
Ahead of the balloting Mr. Piñera—who got 36.6% of the vote in the first round against Mr. Guillier's 22.7%—was narrowly favored. But pollsters said the race was too close to call. In the end Mr. Piñera won with some 54.5% of the vote; Mr. Guillier admitted it was “a tough defeat.” Yet the socialists gave Chileans who treasure freedom a scare. This election season ought to be seen as a shot across their bow.
The failure of socialism in South America—particularly in Venezuela—is no secret. Nor is the success of the market economy in Chile, where the percentage of the population living in poverty fell to 11.7% in 2015 from 68% in 1990, according to the United Nations Development Programme. Yet Chile is increasingly polarized thanks to a public discourse dominated by the left.
Chile's right has spent more than three decades building institutions and refining policies in law and economics to create wealth. It imagined that the results of its work would be enough to build and sustain support.
But the socialists have been busy too. They have spent their time and money organizing factions and going to the streets to denounce, as unjust, a society in which some have more than others. Organized labor, especially in education, has been central to this strategy. This campaign season—including the strong showing of hard-left candidate Beatriz Sánchez in the first round—shows how successful it has been.
Some months ago Mr. Piñera was heavily favored to win, in part because during his first term as president from 2010 to 2014 Chile's gross domestic product grew at an average annual rate of 5.3%. Odds also were with him because of the record of Socialist President Michelle Bachelet, who has been in office since 2014 and currently heads the New Majority—which includes the Communist Party—that was backing Mr. Guillier.
Ms. Bachelet is an avid admirer of the late Fidel Castro and the Cuban military dictatorship. She has spent her presidency working to dismantle Chile's liberal economic model and using the bully pulpit to rail against private initiative.
Growth has suffered. GDP growth during her tenure, including the estimate for this year, is expected to average a paltry 1.8% annually. This means that during her presidency Chile grew less than the world average for the first time in 23 years—with the exception of 1999.
Her defenders blame soft copper prices. But falling commodity prices include oil, which Chile imports. Low interest rates have also been a mitigating factor.
In a Dec. 12 column in the Chilean daily El Mercurio, Mr. Piñera's former finance minister Felipe Larraín pointed out that the International Monetary Fund attributes one percentage point a year of the slowdown in growth to the end of the commodities boom. When the Bachelet tenure is compared with the Piñera tenure, noted Mr. Larrain, that leaves “2.5 annual points [of the loss] ‘made in Chile.' ”
One problem is that Chile is no longer a destination for capital. By the end of 2017, “investment will have fallen . . . for four consecutive years, the worst performance of our country in at least half a century, and this without any external recession,” Mr. Larraín observed. Productivity “will most likely complete its fourth consecutive year of decline in 2017.”
Job creation has been anemic and is now “concentrated in self-employment (largely in the street) and public jobs.” Salaried jobs that come with a contract and social security are harder to come by.
It's no coincidence that growth, productivity and employment slumped as the government raised taxes, increased spending, and passed a labor reform that places a heavy burden on hiring. The World Bank's ease-of-doing-business survey ranked Chile 37th in the world in 2013. This year it came in at 57th.
Mr. Guillier promised to continue Bachelet-nomics and substantially increase the role of government in pensions. He also promised to push for a popular referendum to allow a rewrite of the 1980 constitution, which is not within the existing legal framework.
Low-income Chileans suffered the most from Ms. Bachelet, which could be why Mr. Piñera won in nine of the country's 10 poorest districts in the first round.
Yet Mr. Piñera has a history of unwillingness to defend the morality of the market economy. This is why the middle class is drifting left. Now that he has another chance, Chileans have to hope he has learned his lesson.
Mary Anastasia O'Grady an Opinion Columnist for The Wall Street Journal, writes "The Americas," a weekly column on politics, economics and business in Latin America and Canada that appears every Monday in the Journal. Write to O'Grady@wsj.com. Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by The Wall Street Joiurnal, on December 17 , 2017. (Appeared in the December 18, 2017, print edition. ) Petroleumworld reprint this article in the interest of our readers and does not necessarily reflect the opinion of Petroleumworld and its owners.
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