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Chile: Implications of La Moneda Leadership in the Piñera Era, or Will the New Government Mark a Billionaire’s Flawed Vision in Santiago and a White House Too Prepared to do Business as Usual with a Vastly Changed Latin America?

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The interim between Chile’s January 17th election and the inauguration of its victor, Sebastian Piñera, on March 11th, provides a useful opportunity to reflect on the course of recent U.S.-Chile relations, and the future prospects for cooperation, given the stand-pat tendencies of both governments. Piñera will be Chile’s first right-of-center president since 1990, elected with 52% of the vote in a runoff election that pitted him against Eduardo Frei Tagle, the candidate selected by the 20-year ruling coalition, Concertación. At the same time in Washington, President Barack Obama appointed Chile-born Arturo Valenzuela as Assistant Secretary of State for Western Hemisphere Affairs.

Such a move should have suggested that Washington was to assume a more serious and complex approach in its regional relations, given Valenzuela’s extensive academic and professional association with Latin America, and in particular, Chile. But following a year of the White House’s sub-par performance in dealing with some of its closest neighbors, the status of the North-South relations remains very much in doubt. Meanwhile, the new Piñera administration which takes office tomorrow gives Obama the opportunity to revisit the U.S. relationship with Chile, one of South America’s stronger democracies. Simultaneously, Piñera has an additional challenge as the first task he must confront on his presidential agenda. After taking office, he must continue working on the massive reconstruction process that was begun right after the devastating earthquake that struck on February 26th.

1900-1973: Trade and Influence

The United States has expressed a heightened interest in Chilean politics since at least the turn of the 20th century, spurred by the local copper mining industry which experienced a remarkable boom under the influx of U.S. capital and support. But under U.S. tutelage, Chile witnessed its most viable resource, copper, being exploited by foreign interests. By 1920, Andes Copper, Braden Copper, and the Chile Exploration company dominated the industry, while under the auspices of two larger U.S. corporations, Anaconda and Kennecott. The U.S. firms took their handsome profits from Chile’s copper mines abroad, and often took a paucity of interest in helping in the development of the country’s manufacturing and processing sectors. During the early years of this bilateral relationship, which centered on the development of Chile’s extractive industries, both Washington and Santiago felt pressure to yield to the political clout of the U.S. mining corporations, thus marking the starting point for a troubling history of U.S. political interventionism amid growing internal political strife in Chile as a result of the U.S.–fueled confrontation and civic discord.

In 1947, at the outset of the Cold War, Washington took a keen interest in installing conservative candidates on tickets throughout Latin America, especially in Chile because it had one of the most dynamic leaders in the Southern Hemisphere. While President Gabriel González Videla was elected at the head of the leftist Democratic Alliance, he turned to the right while in office and took steps to eradicate communist party affiliates from positions of power within the government. Meanwhile, the United States publicly supported Chile’s suspension of civil liberties and declaration of a state of siege. By 1948, with Chilean rightists already disturbed by a 6% increase (from 12% to 18%) in the Communist vote since 1941, they rammed through legislation banning communist candidates from running or holding official governmental posts.

Following this blatant act of obeisance to U.S. political leverage, González Videla’s government was replaced in the 1952 elections by General Carlos Ibáñez, with a plurality of 47 percent of the vote. To solve the country’s recurring economic problem with inflation, Ibánez’s financial minister took out a loan from the International Monetary Fund (IMF), giving the institution a veto power over Chile’s economic policies. A common perception of IMF funding operations throughout Latin America is that the lending agency represents the projection of United States’ economic power and symbolizes the pressure to bend to the financial grand design of the Washington Consensus. Still a controversial matter today, the conditions for obtaining an IMF loan include oversight and outside influence in the selection of benchmark growth aggregates and program implementation. While the IMF defends its intense scrutiny and oversight in order to confirm the ability of a loaning country to effectively service and repay its debt, many see it as a way to force the hand of a country’s leader into adopting economic and fiscal policy that adhere to the U.S.-dominated organization’s rules of the road.

The Chile-United States relationship of the early 1960s was marked by the implementation of President Kennedy’s Alliance for Progress, signed in Punta del Este, Uruguay in August 1961. Meant to encourage economic cooperation as well as to prevent Moscow’s influence from penetrating Latin America, the Alliance ended up falling short of its GDP growth goals of 2.5%, and otherwise only providing a small boost to development in the bulk of many Latin American nations. By dangling membership in the Alliance for Progress before democratic countries, Washington was able to manipulate those governments which were under some form of military dictatorship or authoritarian rule. This included: Argentina, Ecuador, the Dominican Republic, Guatemala, Honduras and Peru. Nonetheless, the Alliance generally was seen as a profound failure, in large part due to the vigorous affirmation of sovereignty by most Latin American countries and their subsequent refusal to enact many of the major social programs that Kennedy had laid out. Episodically, some regional countries would come to resent images of themselves as pieces on the chessboard of Cold War strategizing, and some like Chile were more than determined to exercise self-determination and decide what was best for their own people. Another shortcoming of the Alliance was the fact that U.S. presidents after Kennedy were not particularly invested in his social goals and in subsequent years the program fell flat. By the 1970s, when Richard Nixon and Salvador Allende were the leaders of their respective countries, the Alliance was all but scrapped and could only demonstrate negligible effects regarding the region’s welfare.

Even before the 1970s, the United States managed to influence Chile’s 1958 election of Eduardo Frei (father of the Concertacion’s defeated candidate in January’s election). The U.S. Central Intelligence Agency (CIA) is known to have contributed more than 50% of the total funding for Frei’s “revolution in liberty.” Frei won the election with 56% of the vote and proceeded to enact a light economic reform that consisted in part-ownership of the large mining corporations, rather than the complete nationalization advocated by his leftist opposition. The moderate reformist nature of the Frei government resembled the type of U.S.-friendly democracies the Alliance for Progress was intended to boost. However, Chileans would prove to be deeply divided and less than inspired by their administration’s muted economic success.

In Chile’s 1970 election, Salvador Allende barely achieved victory with a 36.3% plurality. When news of the election results reached Washington, President Nixon reacted to the leftist victory by saying, “I don’t see why we need to stand by and watch a country go Communist due to the irresponsibility of its own people.” Sadly, the tactlessness and utter contempt for local governments and institutions that characterized Washington’s approach towards hemispheric relations at that time persevered as a hallmark of successive U.S. administrations to this day. This failure to recognize the sovereignty and capacity of Latin America to bolster its own democratic institutions has led to mindless coups and facilitated the installation of violent and repressive dictatorial regimes, headed by far more on the right than the left.

Nixon’s reaction to Allende’s election stems from a few major perceptions that were held at the time by the White House relating to U.S. concerns over Latin America. First, a leftist victory was synonymous with being a victory for Moscow-style communism, which was totally unacceptable to the U.S. during the height of the Cold War. Second, a precept of U.S. foreign policy during this period was its adherence to the “domino theory,” which, since the election of Allende, saw all neighboring countries of Chile as susceptible to the Communist threat. It was also a shocking concept at the time that any country would freely and fairly elect a socialist candidate. La Via Chilena (the Chilean Way), as it came to be known, was the watershed moment for legitimizing communist parties and movements in a democratic process. For Washington, the 1970 election in Chile of Allende was a major blow to its campaign for the pseudo “spread of democracy” throughout Latin America. Allende’s election represented a democratic choice of a communist path. But according to then National Security Adviser Henry Kissinger, this path could only end in authoritarian rule.

Birth of the Pinochet Era: A Series of U.S. Policy Disgraces

Once they became convinced of what they saw as a communist plot in Chile, Nixon and Kissinger swiftly implemented a program of “destabilization” aimed at toppling Allende’s administration in Chile. Without any concern for the democratic principles of self-determination or non-intervention, the White House administration formed the 40 Committee, a covert operation that worked on plans for removing Allende from office either by a military coup or by putting pressure on Frei’s government to de-legitimize the election results. Finally, in 2000, the CIA disclosed that $6.5 million dollars were paid to the country’s anti-Allende media (notably El Mercurio, Chile’s conservative paper-of-record) and opposition parties that were contesting local and legislative elections. This subversive plotting culminated in U.S. support for the September 11, 1973 military coup. While anti-Allende pressure from the U.S. certainly made the political atmosphere of 1970s Chile more tense, Chile on its own was moving towards a much more volatile political culture. Allende had a myriad of domestic issues that were grinding down on the coherence of his rule. The modest coalition that had narrowly elected Allende into office in the first place, never managed to fully unite.

With a proposed goal of “national reconstruction,” a brutal authoritarian military regime was imposed under army general Augusto Pinochet in 1973. An era of violent political repression and consolidation of power followed, with 3 to 4 million Chileans living in poverty out of a population of over 10 million . Economic reforms that privatized many industries brought about a momentum shift in GDP, leading economist Milton Friedman to coin the phrase: the “Miracle of Chile.” Unfortunately, this increase in wealth was concentrated entirely in the upper classes. Pinochet’s technocrat advisers, the Chicago Boys (deemed such because many had received their advanced economics training at the University of Chicago under Friedman), enacted the reforms that focused on trade liberalization, stabilizing inflation, and privatization. The controversial “miracle” represents the overarching trade-off of the Pinochet regime: GDP growth of 7% by 1985, representing the highest in Latin America at the time, while huge inequality was developing, as 45% continued to live in conditions of poverty. Economic liberalism in exchange for the suppression of human rights and neglect of social development seriously called into question the validity of calling this period in Chilean history a “miracle.”

By 1985, even under a very tolerant President Ronald Reagan, Washington’s patience with the Pinochet dictatorship was waning. In an effort to legitimize U.S. human rights concerns inspired by the White House’s international campaign against the Soviet “evil empire,” Reagan had to step away from friendly relations with equally notoriously oppressive regimes in order to maintain consistency. In an embarrassing self-serving form, the United States under successive administrations had exercised a haphazard and half-baked Chile policy which revealed no consideration for the welfare of Chilean citizens. It would seem as though the political relationship between Chile and the United States was still completely enmeshed with multinational corporate interests, rather than being based on any shared values. By allowing multinational corporations to ride roughshod over the rules of international diplomacy, Washington implemented politically harmful policies that all but destroyed any chance for progressive relationships with Latin American countries to develop in an orderly manner.

Renewed Democracy: Rebuilding a Relationship

A major political event occurred during Chile’s 1988 plebiscite, in which a newly formed centrist opposition coalition calling itself Concertación overwhelmed Pinochet in an election, winning with a 54% majority of the vote. As a result, Christian Democratic Party leader Patricio Aylwin became the first democratically-elected leader of the country since Pinochet’s 1973 coup. The U.S. praised the free and fair elections, pointing out that its promotion of economic liberalism allegedly paved the way for the country’s return to the country’s democratic institutions. The country’s real “miracle”, however, may be how Chile was able to overcome the hypocritical propaganda that helped set the stage for the ouster of its legitimate president, Allende. Even at this late date, marked by electoral defeat, Pinochet was far from done with public role. He served until 1998 as commander-in-chief of the Chilean Army, after which he was appointed a senator-for-life.

During the George W. Bush presidency, Latin American relations were notoriously neglected. The late 2008 implementation of the administration’s Pathways to Prosperity program was drawn up as a swan song by a lame-duck president in order for him to end on a high note after 8 years of complete neglect of the region. The Pathways officially stated its mission as “[seeking] to close this [social and economic equality] gap by empowering small farmers, small businesses, craftspeople, workers, women, indigenous communities, Afro-descendants, youth and other vulnerable groups to participate effectively in the global economy.” The Obama administration has vowed to continue and expand the program in the coming years, as well as to make a more concerted effort to visit and dialogue with the heads of state of Latin America.

The Chile Connection: A Significant Partnership in the Making

Relations with Concertación leaders have improved throughout the coalition’s 20-year tenure. Its leadership was eager to establish trade ties with the U.S. while also entering into free trade agreements (FTAs) with democratic countries in Latin America and across the world.

Following his election in January, Sebastián Piñera stood to become the first rightist president since the formation of Concertación in 1987. Chile’s strict constitutional provision forbidding more than one consecutive term in office disallowed current president Michelle Bachelet from campaigning for a second term. However, a December Adimark public opinion poll shows her approval rating at an unprecedented level of 81%, implying that a campaign for a second term would have been successful. Analysis of the election results has elicited various interpretations, but most observers agree that it doesn’t portray any remarkable shift in ideology expressed by the Chilean people. University of Santiago de Chile professor, Carmen Norambuena observed that, “The Concertación arrived in power with a plan for the country, but it saw more and more that there was a need to negotiate in Congress, where the Concertación does not have a majority, which meant that it lacked a clear political ideal, and that disenchanted the electorate.” Thus, fragmentation within the ruling party, rather than a substantial shift to the right, paved the way for Chilean billionaire businessman Sebastián Piñera to secure the presidency.

If anything, the national endorsement of Piñera represents a further bolstering of democratic processes, as well as an appreciation of the distance between the current rightist coalition and the looming legacy of Pinochet’s dictatorship, the only other example of a rightist government in Chile’s recent past. While some members of Piñera’s coalition have strong ties to Pinochet, he has been adamant in asserting that his cabinet will not contain major players from the Pinochet era. In what remains a very controversial subject, Piñera’s cabinet selection is perhaps unsurprisingly composed of advisers from all over the political spectrum–unsurprisingly, only because the rightist president elect has a tenuous hold on the people’s trust as it is, and a right-heavy cabinet would only sow further distress and unease. The 22-member cabinet contains four members from Piñera’s National Renewal (RN) party, four from the rightist Independent Democratic Union (UDI) party, and independents with various levels of experience in several Concertación governments.

A balance between strengthening relationships with neighboring countries, especially the U.S., the alteration of the domestic status quo in terms of economic growth and the improvement in the standard-of-living is most important for maintaining the average Chilean’s confidence. Of course, in light of the recent devastating earthquake, Piñera will have to run the gamut of disaster response and domestic restructuring as soon as he takes office tomorrow.

The United States has applauded Piñera’s election, with the State Department’s Assistant Secretary Philip J. Crowley declaring in a press release, “We congratulate President-elect Sebastian Piñera on his election and the Chilean people for another exemplary election process which illustrated again Chile’s enormous respect for democracy.” An interesting consideration for the future of the U.S.-Chile relationship comes in the form of recently-confirmed U.S. Assistant Secretary of State for Western Hemispheric Affairs, Arturo Valenzuela. The Chile-born diplomat has a long personal and professional history in Latin America, serving as an advisor under the Clinton presidency as well as contributing extensive writings on the region as the director of the Center for Latin American Studies at Georgetown University. He spent his early life in Concepción (the epicenter of the recent devastating earthquake) until moving to the United States in 1960 when the Great Earthquake (still the most powerful ever recorded, at a magnitude of 9.5) wrought massive destruction in Chile. Without waxing poetic about the implications of the two earthquakes to Valenzuela’s career with regard to Chile, it is interesting that he now has the opportunity, although it’s far from guaranteed, to steer the U.S. response both to Chile and Latin America. While it is unlikely that he will be a slam dunk, his admirers at least hope that he will not deteriorate into a political hack.

Valenzuela brings a nuanced appreciation for Latin American history and democratic processes to the post, which was last held by Thomas Shannon under the Bush administration. The ministerial conference of the Pathways to Prosperity will be taking place in Costa Rica in mid-March, and the goals established at this conference should provide a roadmap for the direction of U.S.-Latin American relations over the next few years. As the country with one of the highest GDPs in South America, at $169 billion, Chile is in prime position to at least partially dictate a new direction for relations with the U.S.

The earthquake on February 26th has caused immense damage to Chile’s infrastructure as well as heartbreaking personal loss. Sebastián Piñera enters office having to balance the interests of those people who elected him and the huge financial burden of reconstruction. Many roads and bridges were destroyed in southern Chile, making it nearly impossible to traverse the country to bring much-needed medical supplies and food to those most affected. Piñera has vowed to spend 2% of 2010’s budget on reconstruction, and while Chile almost certainly will not experience the 5% growth in GDP that was previously anticipated, the restoration of infrastructure and process of rebuilding could provide an energizing economic boost later in the year, once the initial projects are launched.

The U.S. released a statement through the State Department on February 27th proclaiming solidarity with Chileans and to support the country in any way it needs. Chile, being geographically situated on the “ring of fire” earthquake hotspot, as well as a survivor of many powerful tremors in the past, has an extensive disaster relief system in place called the National Emergency and Information Office (ONEMI), organized following the 1960 earthquake. Much needs to be done to overcome the losses and return to ordinary life in many parts of the country. Perhaps the reaction by Santiago, and by extension Washington, will represent an open door for an already long-lasting friendship between these two countries and pay-back for what deservedly should be a contrite US anxious to atone for its major sins of the Pinochet era.