The other side of Chile’s ‘economic miracle’
On the eve of elections, Chileans in Aysen province are demanding action on economic inequality.
Back in the late 1970s and 80s, countries across Latin America came under the influence of the “Chicago Boys” – economists who had studied at the University of Chicago, whose maxim was “let the market decide”.
Influenced by economists such as Milton Friedman, the Chicago Boys’ agenda was supported by the US government, which backed laissez-faire policies in the region. No country was more receptive to the Chicago Boys than Chile, where the military dictatorship of Augusto Pinochet enlisted several of them as finance, economy and budget ministers.
Since Chile’s return to democracy 24 years ago, the country’s economy has grown exponentially. Poverty has declined, the unemployment rate is low, and investors – both local and international – are thrilled with the country’s stability and business-friendly laws. Cheap credit has led to higher consumption. All of this has been hailed as the “Chilean economic miracle”.
Yet despite this, mass demonstrations have roiled the country for the last two years, with protesters decrying the increasing concentration of wealth in the hands of the rich.
On the eve of its presidential and parliamentary elections on Sunday, Chile stands as one of the most economically stratified countries in the world. Economist and Nobel Prize laureate Joseph Stiglitz has stated that one percent of the country’s population possesses one-third of its wealth, while a new study by the University of Chile cites a figure of 30.5 percent – compared to the 27 percent owned by the richest one percent in the US.
The gap between Chile’s richest ten percent and its poorest ten percent is wider than any other country in the Organisation for Economic Cooperation and Development (OECD), a group of 34 countries with developed economies. Over the last three decades, salaries have risen by an average of 15 percent for 90 percent of Chileans, compared to 150 percent for the richest one percent, according to Stiglitz.
In Chile’s southern Aysen region, calls for reform have cut across ideological lines, with local business owners, an outspoken bishop, the region’s conservative senator and congressman, and a socialist mayor supporting a citizens’ movement demanding fairer treatment from the the government and the nation’s economic elite.
They have noted that although Aysen is rich in natural resources – especially fresh water, forests, seafood, wind and hydro-electric energy – nowhere in the country do people have to pay more for their drinking water, fuel, firewood and energy. All of these industries are owned and distributed by three large corporations that set prices and monopolise essential services in Chile.
The rights to Chile’s water are privatised, causing its cost to spike despite its abundance. Because it is privately owned, people cannot use or drink water even if it flows through their own property.
Twenty years ago, many Chilean fishermen came to Aysen because they were able to make a good living from the abundant hake, conger eel and sea bass off the coast. But successive laws have favoured a handful of families who over the last two decades have come to dominate Chile’s multi-million-dollar fishing business.
Oscar Guenteo, a veteran fisherman, says he can no longer afford to take out his boat. “We can only sell to these industrialists, and they pay us so little that it doesn’t cover the cost of the fuel for our boats. And they have huge ships that scoop up everything with nets, so there are fewer fish near the coast. No one polices where they fish. They aren’t supposed to come closer than five miles to shore, which is the area designated for the small fishermen, but they always violate the norms,” Guenteo said.
Our model needs major surgery; it is unsustainable. It gives a few so much power that they can also heavily influence politics.
“The state is helping a select few become filthy rich, at our expense,” argued Ivan Fuentes, a fisherman who has become a prominent spokesman for the populist movement.
Fuentes – who helped lead a protest movement last year to cut off roads to the Aysen region for 40 days – is running for congress, and polls suggest that he will win. “Here there are a select few who make a lot, and a lot who make nothing. And that breeds anger that eventually explodes as happened here in Aysen,” said Fuentes. “That is why I am going to congress: to try to change that, and to speak for our social movements.”
Aysen Senator Antonio Horvath, a member of Chile’s ruling centre-right National Renovation Party, says the free market system has gone too far. “Our model needs major surgery; it is unsustainable. It gives a few so much power that they can also heavily influence politics,” he said.
The Bishop of Aysen has become one of the nation’s most outspoken critics of the current system, saying the economic interests of a few powerful families and corporations, who control nearly half of the companies traded on Chile’s stock exchange, have co-opted Chile’s political class, from the left to the right.
“I don’t think the problem here is who buys, but who allows them to buy and who passes laws that allow the country to be sold to just a few,” said Bishop Luis Infanti de la Mora.
“It doesn’t matter what political coalition they come from. All the parties end up serving the interests of a small minority. The only hope for change is the pressure brought to bear on the political leaders from the people of Chile, who have finally woken up.”