42 The Americas The Economist March 19th 2022
“W
e are heretoday but we don’t
forget where we came from,”
Gabriel Boric told several thousand
supporters in the square behind the
Moneda palace on his first evening as
president of Chile on March 11th. “We
wouldn’t be here without your mobil
isation,” he said, referring to the large
and sometimes violent demonstrations
in 2019 that shook what had widely been
seen as one of Latin America’s most
successful countries. The upshot was the
swift replacement of the political class,
the election victory of Mr Boric, who at 36
is the world’s youngest president, and
the arrival in power of Chile’s most left
wing government since Salvador Allen
de, the radical socialist ousted by Augus
to Pinochet in a coup in 1973.
Mr Boric quoted Allende in his speech
and had earlier paid homage to his statue
in the square. His own destiny may be
different. Allende nationalised hundreds
of businesses and presided over strikes
and hyperinflation. Mr Boric wants to set
up a state development bank and a lithi
um company but has promised fiscal
responsibility and wants broad agree
ments, including with the private sector.
To win a runoff election, he heeded the
advice of centreleft economists to lower
expectations and recognise that change
would have to be gradual.
His job will be tough. His leftwing
coalition, even after allying with the
centreleft, lacks a majority in Congress.
Chile’s economy has more than reco
vered from the pandemic thanks to big
subsidies, which lasted too long, and
irresponsible laws to allow people to
withdraw early 30% of their pension
savings—both approved to assuage an
angry country. As these measures cease,
the economy is cooling and may enter
recession. The outgoing government’sbudget, which Mr Boric says he will imple
ment, cuts spending by 22%. Inflation is
eating into living standards. People in the
north are upset about immigrants. In the
south a lowlevel insurgency by some
Mapuches, an indigenous people, is mixed
with organised crime. The new interior
minister was greeted with gunfire when
she visited this week. Hanging over Chile’s
immediate future is a constituent conven
tion set up to calm the protests, which is
drafting a new constitution. It includes a
large group from the hard left.
“These are circumstances that would
test any government,” says Giorgio Jack
son, Mr Boric’s top aide. “The first chal
lenge is to show we are capable of govern
ing.” The new team has three other priori
ties. The first is a reform to raise the tax
take from 21% of gdpto 26% in four years.
This will involve cracking down on tax
evasion and avoidance, which is rife
among the rich, and raising personal
income tax and mining royalties, accord
ing to Mario Marcel, the new finance
minister. He hopes to get at least part of
this through Congress this year. The money will be spent mainly on improving
health care and pensions and on reduc
ing the burden of student debt, a big
issue for Mr Boric’s followers.
A second priority is pension reform.
Once widely praised abroad, Chile’s
system of individual accounts run by
private funds failed to provide decent
pensions. Last month the outgoing Con
gress approved a taxpayerfunded uni
versal minimum pension worth $230 per
month. Mr Boric has pledged to abolish
the private funds and to pay extra contri
butions into a new public fund. He may
end up being less radical.
The third priority is to influence the
convention, which is independent, so
that the proposed constitution com
mands enough support to be approved in
a referendum due in October. Rejection
would gravely weaken the government.
The new charter is certain to add social
and environmental rights, decentralise
government and give more autonomy to
indigenous peoples. It is not yet clear
whether it will establish an effective
political system or provide enough cer
tainty for businesses to invest. “The
business mood is one of wait and see,”
admits Mr Marcel. Investors are scepti
cal, too, as to whether the government
will resist pressures to spend recklessly.
Mr Boric’s heart is with the memory of
Allende. His inauguration guests were
luminaries of the hard left, such as Jere
my Corbyn, Britain’s former Labour
leader, people from Spain’s Podemos and
Álvaro GarcÍa Linera, the brains behind
Evo Morales, Bolivia’s former leader. But
the new president is also an instinctive
politician. To succeed he will have to
disappoint some of the people in the
square. The trick will be to satisfy as
many as possible while reassuring the
rest of the country.Chile’s new president won from the left. Can he govern like that?BelloThe heart and head of Gabriel Boric
other airport that was half built, costing
the government at least 185bn pesos
($9bn). That airport had problems, but
there are also worries about the new one. It
has a capacity of just 19.5m passengers a
year, about 40% of the number served by
Mexico City’s current airport in 2019. So the
two will operate in tandem, complicating
management of the airspace around the ci
ty. Road and rail links to the new airport
are unfinished, which means it will be un
derused. Just four airlines have said they
will fly from Felipe Ángeles. The only inter
national route is to Venezuela. The case for the refinery is weaker still.
It is intended to make Mexico selfsuffi
cient in fuel, but it will not arrest the fall in
the amount of oil produced by Pemex, the
debtladen stateowned energy giant. It is a
big bet on fossil fuels at a time when many
governments are promoting renewables.
The refinery is unlikely to open this year as
scheduled and is expected to cost at least
40% more than the planned $8.9bn.
Roads and electricity would probably
provide bigger benefits to the poor south
east than the “Maya train”, which is to
transport tourists, locals and cargo aroundthe Yucatán. It will bypass the centres of
two of the region’s biggest cities, Campe
che and Mérida. It is damaging forests and
threatening the area’s famous cenotes
(flooded caves).
The final verdict on Mr López Obrador’s
pet projects, when it comes, is unlikely to
be positive. They appear to have been cho
sen by presidential whim. Many of the jobs
they create will be temporary. The opportu
nity cost is what bothers Ms Ramírez most.
In a country withsomuch poverty, she
fears the governmentispouring money in
to the wrong things.n