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Weekly Report - 18 June 2020 (WR-20-24)

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Political accord salvages rough week for Piñera

The old adage that a day in politics is a long time was borne out in Chile on 14 June. President Sebastián Piñera delivered a national broadcast celebrating the signing of an accord with the bulk of the political opposition, sealing support for a US$12bn fund to combat the coronavirus (Covid-19) pandemic and attenuate its impact on the economy. Less than 24 hours earlier, Piñera had been rocked by the departure of his health minister, whose position became untenable after a major disparity in reported fatalities from Covid-19 emerged. The pressure on Piñera remains unrelenting, however, as Chile’s infection rate per capita soars higher than in any country other than Qatar, compelling him to extend the country’s state of exception for a further 90 days to try and flatten the curve of the pandemic, compounding its economic difficulties.

President Piñera was unstinting in his praise of all those involved in securing support for the political accord after two weeks of intense discussions. He said that a “constructive spirit” had prevailed among not just legislators from rival political parties but also economists, social organisations, trade unions, school teachers, and universities, who had contributed to the debate. The ruling Chile Vamos opposition signed the 14-page accord with the three largest leftist opposition parties: Partido Socialista (PS), Partido por la Democracia (PPD), and Democracia Cristiana (DC). The more radical left-wing Revolución Democrática (RD) took part in the discussions but did not subscribe to the pact. The opposition, which also signed an accord with the Piñera administration in November last year in the midst of serious social protests, said that whether this ‘spirit’ endures in the coming months would depend upon what initiatives are sent to congress.

During his broadcast, Piñera outlined details of the US$12bn emergency fund, which he said would help to “protect family incomes, and recover jobs and economic activity through an efficient and responsible use of public resources”. The big bone of contention for the opposition was the Ingreso Familiar de Emergencia (IFE), an emergency basic income payment to vulnerable households unable to work because of lockdown restrictions. The government agreed to increase this from Ch$65,000 (US$81) to Ch$100,000 per person for a family of four, and broaden its coverage to 2.1m (80%) of Chile’s most vulnerable population for three months. PS deputy Isabel Allende was quick to highlight the increase in the IFE, which she said was essential as the government had failed to appreciate “the magnitude of the health and social crisis”.

The ‘Fondo Covid’ will also seek to boost economic growth through investment, subsidies for job creation, and the provision of credit for firms to resume normal activities, as well as assigning US$500m for health services and US$120m of funding for municipal authorities to improve the local response to the coronavirus pandemic, support for civil society organisations, and unemployment protection for parents and those who care for young children. The ‘Fondo Covid’, which will confer significant discretionary spending powers on the Piñera administration, will be financed by budget reallocations, debt issuance, and sovereign funds. It comes on top of other stimulus plans, such as tax breaks for small and medium sized enterprises (SMEs), amounting to some 5% of GDP. Fiscal sustainability will be preserved, however, with public debt stabilising around 45% of GDP.

Health minister forced out

The accord was a welcome fillip for Piñera as it served to divert attention from the resignation of his health minister, Jaime Mañalich, a day earlier. Mañalich departed under a cloud. Already under fire for his response to Covid-19, he resigned just hours after the Centro de Investigación e Información Periodística (Ciper), a nonprofit foundation dedicated to investigative journalism and the pursuit of transparency, revealed that there was a significant disparity between the fatalities reported by the health ministry to the World Health Organization (WHO) and the official figures reported in Chile.

  • Mañalich

The government was compelled to jettison Jaime Mañalich’s ‘strategic and selective quarantines’, which varied in intensity from municipality to municipality, and place the whole of metropolitan Santiago (8m people or some 42% of the national population) under full lockdown in mid-May after Covid-19 cases surged. It also backed away from his “immunity passports” proposal, after the WHO published a ‘scientific brief’ cautioning that there is as yet “no evidence” to suggest that recovered Covid-19 patients are protected against re-infection. Mañalich himself acknowledged that a ‘Carné COVID-19’ could have fuelled discrimination, giving a minority of people privileges when being hired, re-hired or simply entering public buildings.

Up until 13 June, Ciper reported, the health ministry had confirmed 3,101 deaths from Covid-19 but informed the WHO of more than 5,000 fatalities from the virus. The health ministry denied that it was seeking to conceal the true scale of the crisis, contending that the figures supplied to the WHO included deaths suspected, but not confirmed, as having been caused by coronavirus. But opposition parties insisted that Mañalich must go. While Mañalich said he was resigning out of “Republican duty” as “the next stage of the fight against coronavirus requires a new leadership”, the timing of his departure suggested he was given a helping hand, however reluctantly, by Piñera, a personal friend whom he served as health minister during his first administration (2010-2014).

Enrique Paris, a former head of the Colegio Médico (2011-2017), picked up the vacant health portfolio. Piñera left no doubt about the daunting scale of the task facing Paris, saying he would have the dual challenge of combating Covid-19 and overhauling the public and private health system. On the day Mañalich resigned, Covid-19 fatalities in Chile reached a record high of 231, bringing the national total to 3,101, with a further 6,509 new cases.

Accusing the government of a catalogue of ineptitude, the PPD president, Heraldo Muñoz, said Paris would need to “make up for lost time”, while the DC president, Fuad Chahín, and his PS peer, Álvaro Elizalde, said “a change of strategy” was essential. They urged Paris to listen more to the scientific community and make information more transparent. He obliged them by announcing that both mortality figures would be released from now in the interests of transparency.

On 15 June Piñera extended the state of exception, decreed on 18 March, for a further 90 days with a view to flattening the curve of the pandemic. Paris, meanwhile, said that if Chileans failed to respect the quarantines in place, the measures would have to be toughened. This would immediately test the effectiveness of the Fondo Covid. It is far from clear that it will suffice to support the many poor families reliant upon leaving their homes to earn a living.

How far the Fondo Covid can revive economic growth is also a moot point. The central bank is predicting that GDP will contract by 5.5%-7.5% in 2020, which would mark the worst recession since 1982. The Economic Commission for Latin America and the Caribbean (Eclac), meanwhile, calculates that poverty could increase from 9.8% to 13.7% this year, which could see social protests against the Piñera administration resume with renewed vigour in the near future.