26 The Americas The EconomistMarch 14th 2020
2 known as Isapres. But these demand often
large additional payments. The Isapres
cream off people “with better health and
more money”, according to Carolina Ve-
lasco of the Centro de Estudios Públicos, a
think-tank. Some 77% of the population re-
lies on the public system (known as Fo-
nasa). This is short of money and doctors,
so waiting lists are long. “In Chile 25,000
people a year die while waiting for medical
treatment,” says Germán Codina, the
mayor of Puente Alto, a poor district in San-
tiago, who is from President Piñera’s Na-
tional Renovation party.
Then there is the problem of medicines.
Fonasa provides some free but there are
“queues of up to eight hours to get them,
and sometimes they don’t have it”, says Ms
Velasco. In 2009 the three main pharmacy
chains, which control 90% of the market,
were found guilty of price collusion. Even
today, prices of over-the-counter drugs are
wildly inflated. To take one example, a ste-
roid nasal spray costs $51 in Santiago, com-
pared with $22 in Lima and $13 in Madrid.
This price-gouging is part of a wider
pattern of abuse by businesses. Water and
fishing rights are held as private property,
in practice in perpetuity. Until recently car-
tels flourished in industries ranging from
toilet paper to buses and chickens. Many of
the rich avoid taxes. The top 1% pay no
more than 15% of their income, according
to Rodrigo Valdés, who was finance minis-
ter under Ms Bachelet. “Tax lawyers in
Chile have helicopters, a sign that we are in
trouble,” he says.
Successive governments have tried to
deal with these problems, but not fast
enough. They faced obstinate resistance
from the right and business lobbies. Con-
gress approved a tough competition law in
2009 that makes price fixing a criminal of-
fence. But it is not retroactive. “Many peo-
ple won’t think anything has changed until
someone is in prison,” says Eduardo Engel,
an economist at the University of Chile.
“Those who refused to listen or who
blocked change are complicit in what hap-
pened,” says Mr Codina in Puente Alto. The
constitution, drawn up by the dictatorship,
has been amended more than 40 times and
now carries the signature of Ricardo Lagos,
a Socialist president. But it still gives un-
due protection to vested interests. A score
of “organic laws” can only be changed with
a four-sevenths majority of Congress. The
Constitutional Tribunal, which has a con-
servative bias, has shielded the Isapres
from price regulation, for example.
When Ms Bachelet proposed a new con-
stitution to overcome such resistance in
2015 this was greeted with a collective
yawn. Now it has been seized on as a way
out of the troubles. Opponents fear that a
new charter will lead to the creation of
“rights” that are impossible to fulfil and to
fiscal irresponsibility. But the law for theAprilplebisciteonsettingup a constitu-
tional convention stipulates that the new
document must command two-thirds sup-
port in that body, as well as approval in a
second referendum in which voting will be
compulsory. “The mechanism requires
reaching agreements,” says Giorgio Jack-
son, a left-wing legislator. “So there’s not
much time for radicalisation or space for
polarisation.” There is little demand to
weaken the Central Bank’s independence
or Chile’s strict fiscal rules.
The proposal for a new constitution has
split the right. Some who were initially
panicked into backing it no longer do. De-
spite such resistance, Eugenio Tironi, a po-
litical consultant who ran the campaign
that defeated Pinochet’s attempt to stay in
power through a plebiscite in 1988, thinks
that if turnout in April is at least 60% the
convention will be approved by 60% or
more of those voting.
Mr Piñera has seemed to veer between
the demand for order from his own politi-
cal base and for change from much of thecountry. Both are necessary. The scale of
the protests and violence spread fear
among business folk. “We have a very basic
concern,” says Bernardo Larraín of Sofofa, a
business lobby. “Does the Chilean state
have the ability to maintain public order,
so that people can get to work and compa-
nies can operate normally?” The Carabine-
ros were once respected. They have been
tarnished by recent corruption scandals in
a country with much less graft than many
of its Latin American peers. In the face of
sometimes extreme provocation, they
have been exposed as incompetent as well
as brutal. Almost 1,900 people were hurt by
plastic bullets or buckshot, including 445
with eye injuries, according to the National
Human Rights Institute. At 60,000, the
force is too small. “The police police them-
selves,” says Lucía Dammert, a political sci-
entist at the University of Santiago. “The
political world hasn’t put any limits on
them.” Reforming the police is now widely
seen as essential, but will take years.
Because of its macroeconomic pru-
dence, Chile has money to respond to some
of the demands for more public spending.
This will rise by 9% this year, though much
of that will go on repairing the damage. In
addition, Mr Briones is preparing a plan for
“a gradual and moderate” increase in taxes
and permanent spending. “The list of de-
mands is infinite, we have to prioritise,” he
says. “We are Chile, not Sweden.”
Will that be enough? Much will depend
on whether the constitutional convention
takes off, on whether large-scale violence
resumes and on how quickly the economy
hits its stride again. “Of course there’s more
uncertainty and investment decisions are
being postponed,” says Mr Larraín. Never-
theless, at least before factoring in co-
vid-19, the Central Bank thinks Chile will
avoid recession and that the economy will
grow by around 1% this year, helped by fis-
cal and monetary stimulus.
As with the student rebellion in France
in May 1968, Chile’s events have shaken a
country that seemed to be progressing,
placing both the survival of its president
and its political stability in doubt. Mr Piñe-
ra says he has been reading a new biogra-
phy of General Charles de Gaulle, who
weathered the 1968 protests as France’s
president but bowed out shortly after-
wards. Mr Piñera insists he will soldier on
to the end of his term in 2022.
“We don’t yet know whether this crisis
will be a way of improving Chile or whether
it will get worse,” he admits. The country
lacks a recent populist tradition, but some
of the elements are there. “The people, un-
ited, functions without parties”, proclaims
a large graffito. The next few months will
determine whether Chile seeks a saviour or
follows a path of improving its institu-
tions. Time alone will not heal: there is no
going back to the country of October 5th. 7Over to you, Sebastián
“ What are the three main problems the
government should concentrate on solving?”
Chile,%ofrespondentsSource:CentreforPublic Studies3May 2019 December 2019Constitutional
reformInequalityCrimeEducationHealthPensions706050403020100President under pressure