Chile’s President on Her Country’s Fitful Progress and Future Challenges

Chile has long been South America’s good-news story, but the narrative has taken some twists and turns of late. During Michelle Bachelet’s first presidential term, more than a decade ago, when emerging markets were booming, Chile’s GDP rate hit 5%. Then came a devastating earthquake in 2010 just as Sebastián Piñera came to power. Piñera raised taxes to help pay for reconstruction, but global economic conditions soon began to take a toll. Demand for Chile’s commodity exports slowed, and higher taxes and sluggish growth made Piñera unpopular. In Chile, Presidents can’t serve consecutive terms, and Bachelet was again elected President in 2013 on pledges of free higher education, steeper business taxes and tighter regulation. Government for the people, not for the bankers and corporations, she promised. But keeping those promises became impossible as export prices continued to fall. Growth is now below 2%. Inbound investment is down. Jobs are scarce. Bachelet’s current term ends in March 2018.

When we met recently, I asked her, Where does Chile go from here? “We can’t grow along the same path,” she said. As Chile gets closer to the income levels of developed countries after decades of high growth, she explained, “people empowered by positive change are demanding quick solutions to problems. How do we build an intelligent plan for growth over decades, while responding to citizens’ immediate demands for less inequality and more opportunity? We must do both.”

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