Chile: An economic and political model for South America?
By Bryan Popoola
November 25, 2019
BOLOGNA, Italy — In recent decades, Chile has been seen as a beacon of stability and progress on the South American continent. However, the country has recently been overrun by a series of protests triggered by a metro fare price increase in the city of Santiago. Since October 19th, thousands of people have descended onto the streets in cities across the country, often met with violence from local police forces.
Chilean citizens quickly consolidated to demand a more equal economic system; taking tips from protesters in Hong Kong. The protests, the resulting violence and ultimate response from Chilean president, Sebastián Piñera illustrate some of the reasons why many feel the need to protest: an economic system that sees great wealth concentrated in the hands of a few, general distrust of the state and its intentions, and an entrenched wealthy political class disconnected from the realities of the masses. Many such issues have characterized countries across Latin America as a whole over the last decade, and the Chilean situation appears to be bringing these issues into focus internationally.
Since the end of Auguto Pinochet’s military dictatorship over the country in 1989, Chile has experienced some of the strongest economic growth in South America and has quickly become an important economic actor in the region. Coupled with a stable democratic system, Chile has been hailed as the gold standard of modernity and prosperity in Latin America over the last 30 years. Within the country, however, average Chileans remain skeptical of such progress and its accompanying economic growth. Public opinion in Chile seems to have reached a consensus that President Sebastián Piñera is part of the growing wealthy elite in the country and thus is a part of the problem.Chilean citizens are not content with simple statistics indicating improved economic growth. Rather, they want to benefit from this growth and realize economic gains in their pocketbooks.
Chile is one of the most economically unequal countries on the continent in terms of income distribution: Lower- and middle-class Chileans have not experienced significant increases in real income over this time, as millionaires and billionaires in the country continue to reap the vast majority of the benefits. The recent metro fare hike represented a provocation that required a response from average Chileans.
Many South American economies rely heavily on the export of commodities and intermediate goods, usually in the form of natural resources that are relatively abundant on the continent. Such commodity-based economies often result in the concentration of wealth in the hands of the few owners of these natural resources. In many countries, this is where the state steps in, either by allowing private control of such resources and levying heavy taxes in order to distribute the wealth across the rest of society, or by taking full control of the resources, as was the case with the Chilean copper company CODELCO. In Chile, the combination of mercurial copper prices and reliance on foreign direct investment (most notably from China), has translated into an economy that can change drastically from one year to the next, limiting the government’s capacity to institute redistributive policies. Such a scenario highlights the reason why the protests are being closely watched by both the rest of the continent, and the developing world generally. Chileans are not simply asking for a more equal distribution of wealth – they’re asking for fundamental economic change that will encourage growth to come from inside the country, not from foreign buyers and investors.
Latin America is no stranger to uneven growth and income inequality, with 10 of the 25 most unequal countries in terms of income being found in the region. As a result of Chile’s position as the poster-child of democracy and growth, many in the region are watching what happens in Santiago with great anticipation. The protests may only end if and when a compromise can be found between the people and their politicians. Currently, talks center around a new constitution with many important sticking points relating to the widening wealth gap. If protests prove to be effective in forcing the government to adopt a new, equitable constitution, citizens of other Latin American countries may take note, and pressure their own governments to do the same.