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Investors bet on return of Sebastián Piñera in Chile

Investors bet on return of Sebastián Piñera in Chile

The emergence of a new Latin American middle class has brought fresh demands

If Chile’s stock market rally this year is anything to go by, billionaire Sebastián Piñera is on track to be the country’s next president, again, on Sunday.

The former airline magnate’s 2010-2014 presidency marked the return of the right to power for the first time since the fall of General Augusto Pinochet in 1990. His victory on Sunday would represent the latest shift away from leftwing governments in Latin America, following in the footsteps of Argentina, Brazil and Peru.

“Piñera is winning because he’s the only alternative. The left is in a mess,” says Marta Lagos, a pollster who argues that there is a small chance that Mr Piñera could win outright on Sunday if voter turnout is low. If he fails to get more than 50 per cent of the vote, there will be a run-off poll on December 17.

With the ruling centre-left coalition heading into the elections divided for the first time since it came to power in 1990 — there are five leftwing candidates — polls show Mr Piñera with a double-digit lead over his closest competitor, former television anchor Alejandro Guillier. Chile’s stock market is up 28 per cent from last year on expectations that the business-friendly Mr Piñera will return to power, outperforming all regional peers except Argentina. Ricardo Lagos, the former president who dropped out of the competition to run for the ruling coalition earlier this year, says Mr Piñera’s prospects of winning are enhanced by “a great fracture between citizens and their leaders” which is happening round the world and benefits more individualist, rightwing projects.

In Chile, this fracture is explained by the emergence of a middle class that escaped poverty during the commodities boom with new demands, he says. “In Chile it is exactly the inverse of rich countries. The American dream is over, people voted for Trump as they were unhappy,” he says. Chileans, on the other hand, are more content but still want more.

President Michelle Bachelet attempted to answer those demands — which first surfaced with student protests in 2006, prefiguring the 2011 launch of the Occupy movement in the US and UK — with a reform programme aimed at tackling inequality that is widely criticised for being poorly designed and implemented. 

The reforms, which included increases in corporate taxes and which gave more power to trade unions, were stridently opposed by Chile’s business community. This aggravated a sharp fall in investment in Chile’s copper-dependent economy following the end of the commodities boom. It fell consistently each year from 7 per cent of gross domestic product in 2013 to 3.5 per cent today.

“In three or four years it will be fair to say that Bachelet changed the face of Chile. She made it a more social democratic country, less exposed to the markets — and if the price to pay for that is less growth [temporarily], for Bachelet it’s worth it,” says Eugenio Tironi, a leading sociologist. “Piñera is going to correct, not reverse the reforms. He will tidy the state up a bit and make it more efficient,” he adds.

But at the centre of Mr Piñera’s campaign programme is a commitment to revitalise Chile’s stagnant economy, which has averaged annual growth of less than 2 per cent since Ms Bachelet was re-elected in 2013, compared to an average of about 5 per cent during Mr Piñera’s first term.

“Chile is no longer the star pupil,” says Vittorio Corbo, a former central bank governor. For a long time the “Chilean miracle” was held up as an example for other developing economies by organisations such as the International Monetary Fund and the World Bank.

Although Chile’s economy may have lost its former dynamism, Mr Corbo says it still has sturdy foundations, with a credible central bank, sound macroeconomic management including low debt and the fifth most solid financial system in world, according to the World Economic Forum.

Esteban Jadresic, chief economist at Moneda Asset Management, also sees reason for optimism. He predicts that growth will rebound to around 3.5 per cent next year, as copper prices recover and business confidence improves, after coming last in a ranking of countries measured by the OECD last year.

His victory would leave Chile’s “fragmented and chaotic” centre-left coalition deeply damaged after the elections, says Harald Beyer, director of the CEP think-tank in Santiago.

He speculates whether Mr Piñera — who like other centre-right governments in the region would be unlikely to control a majority in congress — would be able to imitate Argentina’s President Mauricio Macri by moving towards the centre, co-opting the more conservative groups among Chile’s centre-left coalition such as the Christian Democrats.

“The great challenge is how the centre-left will rebuild itself. This will be the big theme of interest once Bachelet has gone,” he says. es un sitio web oficial del Gobierno Argentino