Buenos Aires Herald, February 24, 2015
Out of all political scandals that can affect political leaders, those that involve direct relatives are the most damaging. When a member of a presidential family is involved in a scandal, a leader’s ability to keep the national focus on their policy priorities is undermined. The scandal surrounding the business deals of Sebastián Dávalos, the son of Chilean President Michelle Bachelet, is a big threat to her reputation.
Two weeks ago, the weekly magazine Que Pasa published a story on a US$10-million real estate development deal involving Caval, a company partially owned by Natalia Compagnon, Bachelet’s daughter-in-law. In the deal, the small consulting company had secured a huge loan — some 1,000 times bigger than the company’s value — from Banco de Chile to acquire land whose value was expected to more than double if a change in zoning regulation was approved. The loan was approved by the bank the same week Bachelet won the presidential election of 2013. The revelation produced immediate uproar on social networks. Conservative politicians, who were battling a campaign finance scandal of their own, embraced the opportunity to shift the focus away from their troubles.
In the following days, new revelations added to the scandal.
Banco de Chile revealed that Compagnon had been accompanied by her husband, Sebastián Dávalos, when the loan was approved. Moreover, the bank’s vice-president and largest shareholder, AndronicoLuksic — one of Chile’s wealthiest men — took part in the meeting that led to the loan’s approval. Though it is not clear why Luksic was present at the meeting and who requested the presence of Dávalos, the suspicion is that Caval received the loan, which other banks had previously denied offering, as a personal favour with the expectation of a quid-pro-quo to come later.
Though the zoning regulation change has not yet been approved — and there is no evidence that any government officials exercised pressure to speed up any changes — one of the officials, before he was appointed by the Bachelet government to participate in the process, had certified the value of the property on behalf of Caval, when the company was seeking to secure a loan for the purchase. In recent weeks, Caval has been able to secure a new buyer for the property netting an estimated US$5-million profit.
Though the government alleged that the business involved two private parties, the fact that Dávalos was appointed by Bachelet in March, 2014, to serve official functions transformed it into a political scandal affecting the government. After a few government officials criticized Dávalos for carelessly setting her mother up for political criticism, Dávalos resigned from his unpaid position but insisted on asserting that no laws had been broken. Since the president was on vacation — with Dávalos and his wife — speculation abounded when the president learned of this lucrative real estate business deal.
Yesterday, after she returned from her vacation, Bachelet made a public statement lamenting the situation and stating that she only learned about the business when the news became public. She did not apologize for appointing her son to the sensitive position (that carries budgetary decision-making powers over several government agencies) without asking him for the same disclosure of financial interests required for other government posts.
The scandal has dominated political headlines for two weeks in Chile, relegating to secondary position news about the ongoing investigation into campaign financing — the Penta scandal — that has affected the UDI, the largest conservative party in the country. The effect on Bachelet’s popularity has already been felt, the president’s approval fell by nine points to 31 percent — her lowest since taking office a year ago — and her disapproval rating has increased by eight points to 54 percent. Because many Chileans are still in their summer breaks, it is unclear whether the scandal will continue to damage Bachelet’s popularity even further. The government’s erratic response and Bachelet’s reluctance to admit that it was an error to appoint her son to that position seems to indicate that the fallout will grow still larger. Though the fact that Bachelet has so far acted more like a mother protecting her son than as a president protecting the reputation of her government could also attract support among Chilean women.
Still, there will be some damage to Bachelet and her government. Because Bachelet’s leading campaign promise was to fight against inequality and combat the unequal access to opportunities that exists in Chile, the scandal threatens to damage the president’s credibility where it matters most. If the president’s family takes advantage of the unequal access to opportunities that the Chilean elites benefit from, why should the rest of Chileans believe that Bachelet will do anything to level the playing field?
Presidents have to face political and corruption scandals all the time. Depending on how they respond and what they do to remedy the situation, in some cases governments can actually end up stronger after they face a scandal. However, when the scandal involves the presidential family — as Bachelet has learned over these past two weeks — it is very difficult for the president to avoid paying high political costs.