Brazil & Southern Cone - May 2014 (ISSN 1741-4431)

President Michelle Bachelet is trumpeting progress on three of her electoral pledges: fiscal reform, which in turn will lay the foundations for her promised education reform; and also political-electoral reform, by way of an end to the binominal electoral system, a legacy of the 1973-1990 military dictatorship.

While the fiscal reform faces predictable opposition from the centre-right opposition, Alianza por Chile (comprising the traditional Unión Demócrata Independiente [UDI] and Renovación Nacional [RN]), as well as from the private business sector, the political-electoral reform exposed divisions within the ruling leftist Nueva Mayoría coalition – which comprises the quadripartite Concertación alliance plus the Partido Comunista de Chile [PCCh]).

Meanwhile students – the bane of Bachelet’s predecessor, Sebastián Piñera (2010-2014) – staged their first mass demo under the new government, reiterating their demands for an end to for-profit education in return for voting Bachelet into office for a second time last year. With some student groups threatening to radicalize their actions, education is set to remain the most pressing political issue.

On 14 May, the 120-member chamber of deputies approved the fiscal reform bill, sent down by the executive on 31 March, with 72 votes in favour and 48 against. Of those in favour, 67 votes came from the ruling coalition, as well as a few independents, plus one from Gaspar Rivas, an RN deputy. While some tweaks were made, the bulk of the reform – which aims to raise US$8.2bn in additional revenues annually in order to provide completely free higher education in Chile within six years – remained intact. The main change is a phased increase in the corporate tax rate over a four-year period to 25%, from the current 20%, while the top rate of personal income tax will be cut from 40% to 35%. It also scraps a tax exemption on reinvested profits (known as the ‘Fondo de Utilidades Tributables’ [FUT]).

The initiative now goes to the 38-member senate (where Nueva Mayoría has 21 seats), where further minor changes are expected. President Bachelet and her finance minister, Alberto Arenas, have been clear that the “heart of the reform” is not up for debate, although others, like Senator Ricardo Lagos of the Nueva Mayoria’s Partido por la Democracia (PPD), son of the former president Ricardo Lagos (2000-2006) and chair of the senate finance committee, stress that while the ruling coalition has sufficient votes in both houses to pass the reform, there is flexibility to discuss aspects of the bill in order to ensure a strong consensus behind it. Weber says he expects the bill to receive final approval by late August or early September.

The efforts to build a consensus already have run up against a strong campaign. Political opposition figures including the UDI president Ernesto Silva have described the initiative as “a terrible project for Chile”. Silva accused the Bachelet government of “bulldozing it through [congress] by imposing its majority” rather than allowing for a constructive debate, warning that it would hit the middle classes. Private business sector lobbies like the Confederación de Producción y Comercio (CPC) as well as prominent figures like the multi-millionaire Eliodoro Matte, chairman of the forestry company Empresas CMPC, continue to warn about the impact on investment at a time of slowing growth, particularly in light of the abolition of the FUT.

That these concerns have had an impact was suggested in a survey released by Adimark on 7 May. According to the polls, while President Bachelet’s approval rating was largely unchanged in April (at 53%) compared to the previous month (54%), her disapproval rating shot up 20 percentage points to 32%. Part of this increase was attributed to the government’s handling of the tax reform proposals. (Adimark interviewed 1,171 people nationwide on 4-30 April. The poll had a 2.9% margin of error.)

In response, the government deployed a contingent of ministers to tour the country on a PR mission to explain the benefits of the reform. Education Minister Nicolás Eyzaguirre was sent to the O'Higgins region; the government spokesperson, Álvaro Elizalde, to Cerrillos; the labour minister, Javiera Blanco, to Biobío, the public works minister, Alberto Undurraga, to Atacama; the agriculture minister, Carlos Furche, to San Felipe and Los Andes, while the women’s minister, Claudia Pascual, was sent to Arica. President Bachelet insists that the tax changes will only affect the “richest 1%” of the population (or around 4,500 wealthy families).

First mass student marches

Upping the pressure on Bachelet, the umbrella student organisation, Confederación de Estudiantes de Chile (Confech), staged the first mass march demanding an end to for-profit education.

This suggests that initial hopes for an understanding between the government and the Confech - which saw the Confech desist from taking part in the so-called ‘March of Marches’ staged on 22 March by other civil society groups [RBS-14-04]) - were premature.

On 8 May demos were held in eight cities, including in the capital Santiago, with a turnout of about 40,000 on police figures (although the Confech put it at 100,000). While student protests had become increasingly radicalised and violent under the previous Piñera administration, these latest demos were largely peaceful, with only minor clashes reported. The authorities reported 101 arrests, with 20 police officers injured across the country.

Worryingly for Bachelet however, former student leaders-turned-deputies like Camila Vallejo, Karol Cariola and Gabriel Boric, all opted to take part. Boric is a member of Izquierda Autónoma, while Vallejo and Cariola are deputies for the PCCh. Indicative of the PCCh pledge to keep ‘one foot in government and one on the street’, Vallejo told reporters: “There is no contradiction between legislating and mobilising, the fight to transform the education system takes places across all spheres”.

With some groups like the secondary school students’ Asamblea Coordinadora de Estudiantes Secundarios (ACES), and the Federación de Estudiantes de la Universidad de Santiago (Feusach), threatening to further radicalise their protest actions (see sidebar), the pressure was on Education Minister Eyzaguirre to make good on his pledge to send three legislative bills on education reform to congress before 21 May, when Bachelet was due to deliver her state-of-the-nation address to congress.

Binominal reform – again

Chile’s binominal electoral system, which assigns two deputy seats to each electoral district, has long been a source of complaint by smaller parties, who argue that it favours the country’s two main political coalitions. The first step towards getting rid of this system was taken in January 2014 under the outgoing Piñera government, when the lower chamber ratified an amended bill, approved by the senate in December 2013, eliminating the constitutional provision (Art. 47) fixing the number of lower chamber seats at 120.

On 23 April Bachelet presented an initiative to merge a number of electoral districts and increase both houses of congress, adding 12 seats to the senate (to bring it to 50) and 35 to the lower chamber (to reach 155). Among other things, the initiative also seeks to improve gender equity, stipulating that no more than 60% of any party's candidates can be of the same sex (thereby ensuring a minimum 40% representation for women).

Unlike the fiscal reform however, approval of this initiative in congress is likely to prove more complicated, as a three-fifths qualified majority is necessary – meaning that opposition support will be essential. The proposal aroused opposition from the Right – with figures like Senator Juan Antonio Coloma (UDI) warning that increasing the size of congress was "a bad signal", as it would likely result in an increased representation of populous metropolitan districts, at the expense of rural areas.

Of greater concern for the executive, however, was the response from within the ruling coalition. The president of the lower chamber, Deputy Aldo Cornejo of the Partido Demócrata Cristiano (PDC, the biggest party in Nueva Mayoría), failed to attend the presentation of the bill in protest at not being consulted about it in advance. Another deputy from the ruling coalition, Fidel Espinoza of Bachelet’s own Partido Socialista (PS) was more explicit, tweeting: "I oppose the increase in the number of deputies and the fusion of districts".

Bachelet in Argentina

Having pledged that her foreign policy would focus on deepening regional integration and boosting South-South cooperation (as well as strengthening ties with the Asia-Pacific region) [RBS-14-03], President Bachelet paid her first official visit overseas to Argentina, where she met her ally, President Cristina Fernández.

During the meeting, on 12 May, the two left-leaning leaders pledged to deepen bilateral ties, which had weakened under Chile’s previous centre-right Piñera government. In part this was because of the case of Sergio Galvarino Apablaza, a former guerrilla wanted in connection with the murder in 1991 of the UDI’s founder, Jaime Guzmán. While Argentina’s supreme court had approved Apablaza’s extradition in 2010, subsequently he was granted political asylum, after the Fernández government opted to allow Argentina’s national committee for refugees (Conare) to decide on his fate.

Bachelet and Fernández reportedly discussed the Apablaza case. Chile’s Foreign Minister Heraldo Muñoz would only say to reporters that the case “remains in the judicial sphere”.

The two women also discussed re-launching the bilateral Maipú treaty. Inked in 2009 under Bachelet’s first government (2006-2010), it aimed to improve infrastructure connecting the two countries across their joint 5,000km border. Examples include an Andes railway crossing connecting the town of Luján de Cuyo in Argentina’s Western province of Mendoza with the Chilean city of Los Andes in the Valparaíso region. End box

• Rethinking priorities?

In a national TV interview on 16 April, President Bachelet said she was considering adjustments to the national budget and could re-allocate funds expected from her proposed new fiscal reform to finance reconstruction efforts after the 1 April earthquake in the north of the country and a 12 April fire in Valparaiso - the worst urban fire in the country's history. On reports from Chile’s national emergency office (Onemi), the fire, the cause of which is still unknown, resulted in the deaths of 16 people while 2,500 houses were destroyed, 11,000 people evacuated and 1,145 hectares of land affected overall.

• Ezyguirre

On 9 May the Asamblea Coordinadora de Estudiantes Secundarios (ACES) and the Federación de Estudiantes de la Universidad de Santiago (Feusach) asked the comptroller general’s office to investigate Education Minister Nicolás Eyzaguirre for “negligence of duties”. They accuse him of reneging on a campaign promise to end for-profit education. Other student organisations – like the prominent Confederación de Estudiantes de Chile (Confech), have not backed the action, deeming the 8 May protest marches a sufficient means of exerting pressure on Eyzaguirre and the Bachelet government to clarify and expedite the government’s promised education reform.

• New Codelco leadership

On 12 May Chile’s President Bachelet appointed an economist, Oscar Landerretche, at the helm of the board of directors at the state-owned copper mining company, Codelco. Bachelet also appointed two new Codelco directors: Dante Contreras and Laura Albornoz. Also likely to be replaced is the company’s CEO, Thomas Keller, appointed in 2012 by Bachelet’s predecessor, Sebastián Piñera (2010-2014).