Brazil & Southern Cone - May 2006 (ISSN 1741-4431)

On 21 May President Michelle Bachelet set out her plans for government to congress. The president's "roadmap" speech, which marked the first day of the new legislature, focused on four areas which would turn Chile into a "modern country" by the bicentenary of its independence, 2010. The four areas Bachelet identified were: pensions, education, innovation and entrepreneurship, and quality of life. She also set out how her government plans to take advantage of the record high prices of copper, Chile's most important export.

The hour-and-a-half speech was vague on details. As regards pensions, Bachelet said that "without secure pensions there is no chance of a peaceful old age", but she declined to spell out her government's policy. On education she was more specific, promising universal pre-school and declaring that her government had already created 20,000 new places for pre-school children. 

To stimulate entrepreneurship her government is setting up the Small and Medium Business scheme (pymes) which will offer tax breaks to smaller companies and which hopes to create 130,000 jobs this year. The government is also aiming to increase investment in R&D by 50%, to 1% of GDP by 2010, so that Chile exports not only metals and salmon, but technology such as software for mining and equipment for healthy fisheries. On the fourth point, quality of life, Bachelet plans to improve the standard of social housing and establish a ministry of citizen security to improve policing. The president also said her government planned to eliminate indigence by 2010. 

Copper

One of the most eagerly anticipated parts of her speech was what she intended to do with the windfall profits from the high copper price, which has brought the treasury an estimated extra US$9bn this year. Bachelet proposed setting up two funds - a pension fund and a social and economic stabilisation fund - in order to ensure the benefits from the high price were not transitory. She said that despite the high copper prices, her government would continue to obey the 1% fiscal surplus rule it had set itself. 

Of the huge profits from copper revenues in the first months of 2006 - the price has jumped 69% in 4 months - only US$130m is being earmarked for the spending increases. The finance minister, Andrés Velasco, has since announced there is plenty of funding to pay for Bachelet's expanded social programmes. He also noted there was a budget surplus of 2.3% of GDP in the first quarter of 2006, due largely to the copper boom.

Other measures announced in the speech included the provision of handouts of Ch$18,000 (US$35) to the country's poorest 1,200,000 families to help them offset the increasingly high price of fuel as winter approaches. Chile imports 90% of its oil. The president also promised to increase the number of government scholarships to allow gifted students to study abroad.

Outside congress there were violent disturbances as state police clashed with demonstrators demanding Bachelet fulfil a campaign promise to replace the Pinochet-era "binomial" electoral system, which pressures "lists" of candidates to fall into one of the country's two large coalitions, with a more proportionally representational process. The new president has also faced major demonstrations from students this month, who have been demanding, sometimes violently, travel passes, free university entrance exams and a nine-hour school day.