Update on Chilean Politics. July 1999.

Patricio Navia


After the impressive victory by socialist Ricardo Lagos in the Concertación primaries, Lagos began to organize his campaign for the December presidential elections. He is front runner in all presidential pre-election polls and his victory in the primaries is expected to give him an additional boost. Exit polls conducted during the primaries reported that half of Christian Democratic sympathizers voted for Lagos. Lagos needs to work to secure the majority support of the CDP base to succeed president Frei as the third consecutive Concertación president.

After their worst electoral defeat since the 1970 presidential elections, the CDP leadership resigned and a provisional president was appointed. The outgoing leaders, critical of Lagos and often perceived as lukewarm Concertación supporters accepted their defeat and are expected to take a low-key role during the presidential campaign. They are not expected to leave the CDP or to campaign for a candidate other than Lagos.

The reorganization of the CDP covered most of the political pages in the press during June. Several names were tested as possible consensus presidents to lead the CDP transformation and to prepare the party for the 2000 municipal and 2001 parliamentary elections. Although the name of Gabriel Valdés, a senator and the all-around most respected CDP politician was suggested, it is more likely than a younger centrist leader will be elected CDP president.

President Frei’s ratings continued to fall as the tensions with the military over the Pinochet arrest increased, the indigenous Mapuche problem lagged on, student and port labor unions continued to strike and confront the anti-riot police. However, President Frei’s greatest headache is the electricity crisis. Power blackouts have become part of the routine and no definite solution is expected soon. Heavy rains have helped alleviate the problem, but the rain deficit continues to be higher than normal.

The economic crisis has deepened as employment, growth and consumption figures have fallen to the lowest levels in 16 years. Growth for 1999 is expected to be less than 1%. The Central Bank announcement of a 0.75% reduction in interest rates (to 5%) was welcome by most analysts, but criticism over the Central Bank’s handling of monetary policy continue to surface.

The government’s privatization plans have moved forward. The Spanish conglomerate ENDESA was awarded 42% of the shares of EMOS, the water works formerly state-owned company that serves Santiago. The $ 964 Million price tag makes EMOS the biggest privatization deal in Chile’s history. Revenues from the sale of 42% of EMOS are expected to be used to finance infrastructure programs aimed at reducing unemployment.

President Frei was scheduled to announce a package of measures to stimulate economic recovery on June 21. However, early on June 21, his cabinet resign in full and the day’s most important news was the cabinet reshuffle not the economic stimuli package.

As predicted, the economic team was kept intact, but the minister of Defense, Presidency (Secretaría General de la Presidencia) and Government’s Spokesperson (Secretaría General de Gobierno) were replaced. Former defense minister Edmundo Pérez Yoma was brought back to his old post. Pérez Yoma led the change of command of the army from General Pinochet to General Izurieta. Pérez Yoma’s return was welcome by the military and the Socialist Party and he is expected to reduce tensions between the armed forces and the government.

Foreign Minister Jose Miguel Insulza was made Minister of the Presidency. He replaces John Biehl, who formerly served as Chile’s ambassador to the U.S. Biehl proved unable to muster legislation through Congress and failed to organize the Concertación’s congressional delegation and rally them behind President Frei’s legislative priorities. Insulza is expected to use the political capital earned among conservative politicians to secure legislative passage of Frei’s priorities in the remaining nine months of his government.

Insulza is replaced by Juan Gabriel Valdés, former Chief of Foreign Trade of the Ministry of Foreign Relations. Valdés had recently resigned to join Ricardo Lagos campaign team. His appointed is widely perceived as indicative of Lagos’ direct approval of Frei’s cabinet changes. Valdés appointment also sends a strong signal to the Concertación leftist PPD and PS parties that Lagos fully supports Frei’s agenda.

As Government’s Spokeperson (Secretaría General de Gobierno), former agriculture minister Carlos Mladinic replaced socialist Jorge Arrate. Arrate had kept a very low profile since Pinochet’s arrest, when he refused to take on the public defense of the general. His departure was widely expected. Mladinic was replaced by one of his close assistants, Angel Sartori. The number of cabinet posts held by the CDP, Socialist and PPD parties did not change.

Pérez Yoma and Insulza are expected to join Interior Minister Raúl Troncoso in the effort to find a final solution to pending human rights cases and the tensions caused by the arrest of General Pinochet. Constitutional reforms, closure to pending human right legal proceedings, finding the truth on those disappeared during the dictatorship and the return of General Pinochet are the issues at stake in the negotiations. The implicit support of the Lagos camp is assumed given the inclusion of Insulza as Minister of the Presidency and the Valdés appointment (two key Lagos supporters).

The economic stimuli package announced by Frei on June 21 included a call to increase spending, subsidies for home ownership, a public works project and tax relief for new investments. The opposition criticized the package as insufficient, but promised to cooperate to overcome the crisis.

The opposition candidate, Joaquín Lavín, does not directly benefit from the economic crisis as he has been a strong advocate of reduced government intervention in the economy. Popular discontent with the crisis has increased pressures for the government to take a more active role in the economy. Lavín has been careful in his attacks on the government to distance himself from those demanding greater government intervention in stimulating the economy. His calls for tax reduction and increased privatization have neutralized by the already existing low tax rates and the recent privatization of EMOS.