Brazil & Southern Cone - October 2012 (ISSN 1741-4431)

It’s been another politically tricky year for the administration led by President Sebastián Piñera. Despite Chile’s solid economic performance, the government continues to face simmering social discontent with various social groups, led by students, demanding more equitable wealth distribution. President Piñera has sought to appease these demands by offering minor concessions. This only served to embolden the political opposition, which has made life difficult for the ruling Coalición por el Cambio in congress as it looks to position itself ahead of the upcoming electoral season, which starts with this month’s (October 2012) municipal elections and culminates with the presidential election late next year (2013). The Coalición por el Cambio would like to limit an further political damage ahead of the elections, but it finds itself bracing for yet another bruising battle in congress, as the executive stubbornly sticks to its plans.

Following a deal on the minimum wage [RBS-12-08] and the approval of a fiscal reform to raise funds for education [RBS-12-09], the 2013 budget is the last hurdle in congress for the Piñera government, which is trying to address the various social demands upon it without having to cede too much to the demonstrators. To date it has met strong resistance to its proposals, both in congress and on the streets. The budget negotiations will be no different, as it represents the last chance for the government’s opponents to force it to change its economic policies.

The draft budget was submitted to congress by Finance Minister Felipe Larraín on 30 September, just meeting the constitutional deadline. Larraín proclaimed that it sought to “address the country’s problems and the needs of all Chileans with fiscal responsibility”. He added that the proposal not only looked to fulfil assumed commitments but also to guarantee economic growth. “We don’t want bread today and hunger tomorrow; we want a budget that sets the bases for Chile’s development over the next couple of years”, Larraín stated. According to Larraín, the US$62bn budget represents a 5% increase on the 2011 plan, on the back of last year’s real annual growth rate of 6.0%.

Larraín made much of the fact the bulk of the funds 68.3% have been assigned to social spending. This includes US$1.2bn in additional revenues expected from the newly approved fiscal reform. This will be destined exclusively for education, taking total expenditure on education to US$12.8bn, up 9.4% increase year-on-year (and representing 4.6% of GDP). In concluding his presentation, Larraín called on congress to approve the budget well in advance of the 30 November deadline in order to avoid a repeat of last year, when it was only approved at the last minute. With the municipal elections scheduled for 28 October, the government will also be hoping that the opposition does not try make an electoral issue of the budget talks.

After Larraín’s presentation to congress, President Piñera gave a nationally televised address in which he presented details of the budget to the public. He stressed that the 2013 plan represents the “biggest investment in education in our history”. This may be the case, but some critics were not satisfied, arguing that the government could have been more generous. While such sniping may have been expected from the opposition, there were also complaints from within the ranks of Coalición por el Cambio. Senator Hernán Larraín, a prominent member of the senior coalition partner Unión Demócrata Independiente (UDI), pointed out that in addition to assigning all of the additional funds from the tax reform to the education sector, the government should add additional funds on top of that to reflect the 5% overall increase in the budget. Otherwise, he argued, its “credibility would be jeopardised”. This was quickly rejected by the executive on the grounds that the slated 9.4% increase in education spending will far exceed the general 5% increase in other sectors.

Senator Larraín’s comments may have been intended as a way to tacitly distance the conservative UDI from the executive ahead of the municipals. Curiously, in closing his national address Piñera asked congress to hold a “responsible” debate on the budget and not to “fall for the siren calls of populism, irresponsibility and demagogy”. It was unclear whether the president’s comments were aimed at the opposition or legislators from the ruling alliance.

The municipal campaign begins

The official campaign period for the municipal elections began on 27 September. Mayoral candidates launched their campaigns a little nervously, in the knowledge that the municipal polls will be the first under new electoral reforms approved last year [RBS-12-02] aimed at encouraging younger voters. Also aware of this is the student protest movement, which also in late September re-launched its campaign for a free state-run quality education system, staging mass demonstrations in the capital Santiago and outside congress in Valparaíso that coincided with budget day. The students complain that the proposed education spending is not enough and argue that government’s reform plans for the education sector and not radical enough and will only reinforce the existing system. University students are particularly critical of the plans to assign more funds toward a reform of the current state-sponsored credit system for higher education (CAE), which they say will perpetuate an unfair system. The confederation of university students, Confech, also points out that the bulk of the slated spending increase (US$9.06bn) has been allocated to the primary and secondary school sectors, rather than the third level sector.

On 1 October President Piñera came out in defence of the education sector budget, noting that “1 in 3 pesos in the [2013] budget is allocated to education”. Piñera added that total education spending would go beyond the US$12.08bn directly allocated to the education ministry in the budget to include also two additional fiscal measures: the reform of the CAE system and an increase in direct government contributions to public universities. He asked critics to look properly at the executive’s plans before “irresponsibly” calling for more spending (see sidebar).

On 3 October Education Minister Harald Beyer presented the higher education sector budget in detail to the Confech and the public universities’ deans’ council (CRUch).

Beyer said that US$2.28bn has been directly allocated to higher education and stressed that the total invested in the sector by the government will higher still. According to Beyer, the reform of the CAE - which will reduce interest rates on loans from 6% to 2% upon its take over by the State - represents an additional US$220m cost that will be absorbed by the government. He also noted that public universities stand to receive US$366m in direct contributions from the government, up from US$250m last year, for the improvement of their services. Yet the students and the CRUch seemed unconvinced. The CRUch vice-president, Juan Manuel Zolezzi, responded, “We and Confech expected more”. According to Zolezzi, if the government really wanted to improve public higher education it would have to increase its direct contributions “by at least 20%”.

The following day (4 October) local pollsters Adimark published its September poll findings, according to which the government’s approval rating fell four percentage points to 32%, from 36% previously. According to Adimark, the decline owed to the public’s continued negative perceptions about the government’s handling of certain issues like crime (only 17% approved of its performance) and education (23%). Commenting on the poll, the government spokesman Andrés Chadwick remarked, “No government wants to fall in the polls...but I don’t think that this will have an effect on the municipal elections”. Yet in the same breath Chadwick declared that the municipal vote “ a bigger poll, that will tell us how things stand in the country”.

• Piñera highlights budget’s responsibility

President Piñera described the 2013 budget as “responsible” amidst the global economic crisis. “We could irresponsibly increase spending, but what for? To end up like Greece or Spain?” he queried. He added that it would be all too easy for the government to say yes to everyone’s demands, but that it not “fall into this irresponsibility”. Chile’s budget is a “serious” one that will allow it to address its social issues while maintaining economic growth, he observed.

• Enríquez-Ominami promises free public education

On 4 October Marco Enríquez-Ominami formally launched his bid as the 2013 presidential candidate for his Paritdo Progresista (PRO). At the Caupolicán theatre in Santiago, Enríquez-Ominami promised that if elected as president he would propose drafting a new constitution to include a comprehensive tax reform so as be able to offer free public education for all. A former deputy for the Partido Socialista, Enríquez-Ominami quit the PS in 2009 to launch his first presidential bid as an independent in 2010. He took 20% of the vote in the first round, which many believe contributed to the Concertación’s defeat.