The EconomistNovember 2nd 2019 The Americas 312
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heproteststhathave convulsed Chile
have taken every conceivable form.
Theybeganwhenstudents in Santiago, the
capital,starteddodging metro fares, which
hadbeenraisedby 30 pesos (four cents) at
peaktimesto 830 pesos. Anger then began
toexpressitselfinarson and looting and
spreadtoothercities.The government im-
poseditsfirstcurfewin Santiago since the
endofdictatorshipin1990. At least 20 peo-
plediedintheunrestand more than 1,000
havebeeninjured.
OnOctober25th1.2m people, a fifth of
thecity’spopulation,converged on central
Santiagotoexpress(peacefully) their dis-
gustwithinequalityand with the way the
countryisrun.“Iwould like to retire but
can’t,”saidCarolina,a 62-year-old teacher,
whohassavedenough for a pension of just
$275a monthafter 30 years on the job. Plac-
ardsdemandedeverything from a lower
vatonbookstoa newconstitution.
Sebastián Piñera, Chile’s centre-right
president,atfirsttook a tough line with the
malcontents.“Weareat war,” he declared
duringtherioting.The state’s response was
heavy-handed. Although most of the
deathsoccurredbecause of arson, Chile’s
HumanRightsInstitute is compiling evi-
denceof 120 casesof abuse by security
forces,includingfivekillings.
As protests grew, Mr Piñera’s tonechanged. On October 19th he rolled back the
fare increase. On October 22nd he an-
nounced further concessions. These in-
cluded higher public spending on pen-
sions and health care, a boost to the
minimum wage and a reversal of recent
rises in electricity prices. These measures
will cost the government $1.2bn, 0.4% of
gdp. To help pay for this the government is
to raise taxes on top earners.
Mr Piñera followed that up on October
28th by replacing eight members of his cab-
inet. The new cabinet has a younger,
friendlier face. The president, who prom-
ised “better times” when he took office in
2018, says these changes herald the start of
“new times”. But it is unclear how much
novelty he is planning, and whether it will
satisfy Chile’s restive people.
Violence has lessened, but continues.
Some protesters are demanding Mr Piñ-
era’s resignation. On October 30th he an-
nounced that two high-profile internation-
al meetings, a unclimate conference and a
summit of Asian and Pacific countries, will
not be held in Santiago. He wants to focus
on restoring order and talking to Chileans.
If Mr Piñera is to deal with the roots of
discontent, he will have to reform Chile’s
way of providing health care, education
and pensions, believes Eugenio Tironi, a
sociologist. Under a model developed by
free-market economists during the dicta-
torship of Augusto Pinochet, who ruled
from 1973 to 1990, citizens are expected to
save for their own retirement.
In many other countries, public pen-
sions are financed by taxing current work-
ers and giving the money to current pen-
sioners—a system that comes under strain
when the population ages. Chileans, by
contrast, invest the money they save in pri-
vately managed funds. This system has
helped Chile manage its public finances
and encouraged the development of long-
term capital markets, which in turn has
boosted economic growth. But Chileans
like Carolina are furious to discover that
they have not contributed enough money
to pay for adequate pensions. Many are
equally angry about long waiting times to
see doctors in the public health system and
about the lousy education available in pub-
lic schools.
Post-dictatorship governments have
tried to boost public spending on the
hard-up. In 2008, for example, the Socialist
government of Michelle Bachelet in-
creased the value of payments to schools
attended by the children of poor families.
But even after such changes the govern-
ment spends less than 11% of gdpon educa-
tion, health and pensions, well below the
average of the oecd, a club of mainly rich
countries, to which Chile belongs.
The conservative Mr Piñera is unlikely
to scrap a system which in many ways has
served Chile well. It is the second-richestSANTIAGO
Thepresidenttriesto set a new
direction.Thecountry may not followChilePiñera’spickle
Marching for moreample of Uruguay, which repaid its credi-
tors after a crisis in 2002 slowly, but with-
out subjecting them to a “haircut”. That
may not work in Argentina given the size of
its debts (near 90% of gdp, according to
jpmorgan Chase) and its weak currency.
But investors welcome the sentiment.
Mr Nielsen, who led Argentina’s negoti-
ations with the imffrom 2003 to 2005, may
reprise that role as Argentina seeks to re-
vise the terms of its existing $57bn loan
from the fund. That may make Mr Kulfas, a
general manager of the central bank during
Ms Fernández’s presidency, the favourite
for the top economic job. He is viewed as a
traditional Peronist in his economic think-
ing. “So expect protectionism, interven-
tionism, strict currency controls to limit
capital flight,” said a former senior official.
A big job for Cecilia Todesca, a moderate
who served alongside Mr Kulfas at the cen-
tral bank, would be a reassuring signal.
Other election results will have a bear-
ing on the struggle for power within the Pe-
ronist government. The province of Bue-
nos Aires, home to almost 40% of
Argentina’s population, elected Axel Kicill-
of as governor. A former economy minister
under Ms Fernández, he will have an influ-
ential voice. And it is not an entirely reas-
suring one. “The economic situation we in-
herit today represents scorched earth, the
ultimate failure of neoliberalism,” Mr Ki-
cillof declared at the Peronists’ victory cel-
ebration.
Even so, other results suggest those
scorching “neoliberals” may have a say in
how Argentina is governed. A member of
Mr Macri’s party won re-election as mayor
of the city of Buenos Aires by a huge mar-
gin. Mr Macri’s coalition looks likely to
form the largest group in the lower house
of congress (although Mr Fernández’s alli-
ance will control the senate).
“The good news is we have two broadly
based coalitions coming out of this,” con-
cluded Sergio Berensztein, a political ana-
lyst. The Peronists will have to seek allies
rather than berate their enemies. With
luck, Mr Macri will have left a political lega-
cy of “conversation, not conflict”.
Mr Fernández’s foreign policy may be
more ideological than his economic policy.
His first foreign trip as president-elect will
be to visit Mexico’s populist president, An-
drés Manuel López Obrador. Relations with
Brazil, Argentina’s biggest neighbour, are
off to a frosty start. Jair Bolsonaro, Brazil’s
right-wing president, refused to congratu-
late him on his election victory.
“All I care about is that the Peronists and
Cristina will look after us once again,” said
Marta Moreno, a housewife at Mr Fernán-
dez’s victory rally. The poster in her hand
recalled an election victory of 73 years ago.
It bore the image of Eva Perón, General Juan
Perón’s wife, who is still popular with those
who want leaders to look after them. 7