Chilean Presidential Elections 2017: what does this 2nd round mean?
Country Risk Chile analyzes the outcome of the 1st round of presidential elections in Chile, held Nov 19. As a result, a 2nd round brings conservative ex-president Sebastian Piñera - with 36% of the public vote - to compete against independent senator Alejandro Guillier - with 22% - from the center-left governing Nueva Mayoria coalition, Sunday, December 17. Out of the 14 million voters registered to cast their ballot, only 6,650,000 million turned out (46%) highlighting the current trend (and global tendency) of absenteeism (or disaffection) in capitalist societies.
Ahead of Sunday, Dec 17, what are the 2nd round implications for enhanced prosperity in the country? How should we read the candidates' programmatic adjustments to allure the "hidden vote", to conquer the "political center"? Is this 2nd round a fresh political battle over the legacy of Bachelet, i.e. to repeal or deepen the reforms? Or is it a historical call on our talent-related capital in ruling elites and new actors to break new avenues for enhanced growth and development?
Due to the new electoral reform passed under Bachelet's administration, seeking to enhance the political representation, a newly formed Frente Amplio (FA) coalition calling for the radical promotion of social rights and with an anti-establishment sentiment component, has become the third most significant political force in Parliament with 20% of the public cast (a turnout of 1.336.824 voters, according to official records from SERVEL data. The FA factor/surge in results is thus contributing to tilt a 25-year distribution of political power into a new equilibrium outcome.
Center-left governing Nueva Mayoria (NM) coalition Alejandro Guillier is the second most powerful force (22% of the public vote, or a turnout of 1.496.560 voters). And center-right Chile Vamos (CV) coalition, with the conservative candidate, and ex-President Sebastián Piñera, still leading in preferences, with 36 % of the cast (a 2.416.054 turnout), but not strong enough to anticipate an easy victory in the 2nd round.
Therefore, under this new political equilibrium, is this "unexpected result" moving Chile into "uncharted territory" as The Economist describes? Or is this new political outcome a more competitive distribution of forces which can potentially reach better economic accords to hit enhanced prosperity? Country Risk Chile will attempt to analyze this 2nd round as a strategic exercise. Why is the new Parliament key to negotiating the new economic accords to bring Chile into development, and what are the risks and new opportunities that this new correlation of forces brings to move Chile closer to "the path of full development" and away from "uncertainty"?
There go the Polls again
As pointed out by Country Risk Chile on the successful win of Trump in America or the referendum result in the UK, and the apparent inabilities of polls and political science to have anticipated the surge of the anti-establishment sentiment, Chile was no exception. In what it seems to be a current/global trend in capitalist societies, polls and opinion surveys, are failing to properly read into the minds and hearts of voters. Thus, the potential surge of the newly formed Frente Amplio coalition as a significant political force was downplayed and now its surge becomes the "election surprise" according to all major think tanks, opinion leaders, and expert voices.
Country Risk Chile had monitored the political spectrum ahead of primary elections and then again after the primaries and had warned against the effect of "objects larger than they appear" due to the absence of candidates from the Nueva Mayoría governing coalition. NM Guillier and Christian Democracy Goic did not participate in the primaries. In that opportunity, the electorate was offered to choose a candidate to represent two different visions on how to steer the country. On one hand, the center-right Chile Vamos coalition candidates (with Piñera constantly leading the polls), with a strong focus on growth and calling to repeal reforms. On the other, a radical left coalition (Frente Amplio) calling to deepen a program of reforms and end the private pension systems (NO+AFP movement). The roughly 1.417.637 turnout for Chile Vamos against the roughly 327.613 for Frente Amplio could be easily construed as a turn to the right in the political spectrum, undoubtedly, as the Nueva Mayoria had not participated, but that was precisely the catch.
Polls in Chile continued to give center-right Chile Vamos coalition's candidate, Sebastian Piñera a clear lead and portrayed the candidate as the most competitive to win elections; thus media and think tanks publicly projected a 45% voting edge for Chile Vamos's Piñera in the 1st round. Think tank CEP even anticipated a merely 8% for the newly-formed radical left Frente Amplio (FA), and so did CADEM. with 14% In the wake of results, polls and opinion surveys have been severely criticized. In that line, harsh criticism came from academic voices such as think tank Espacio Público's Eduardo Engel - who had been summoned by Bachelet to elaborate new rules and principles guiding the new electoral reform with stringent legislation, prompted by the illegal campaign financing scandals and proceedings. Engel has been particularly critic of their methodology. Country Risk Chile estimates polls have suffered the same condition they did in Europe and in America during the latest political hallmarks such as Brexit and with Trump. They have apparently failed to read into the ever-changing path of history, which is inevitable change, and transformation, away from the status-quo.
Therefore, this "surprise factor" (in the light of previously projected results announced by polls) came from the 1.336.824 citizens who turned out to cast their ballot for FA Beatriz Sanchez (20% of the votes), who helped to elect 20 FA members in the lower house and 1 FA senator in the upper house (clearly surpassing the roughly 327.613 cast FA obtained in the primaries, SERVEL data. This fact alone speaks for the new political landscape (and the social and economic preferences involved) in the wake of the end of the binomial law. As with the surge of the vote for Trump, disaffected citizens and their preference for radical change have been minimized and so have been the structural, underlying problematic causes for this political surge, on Nov 19. The social and economic preferences reflected in the surge of FA urgently call for the perfection of public policy (such as pensions, health, and education) to impede the surge of intransigent, populist, backward voices. The fact that President Michelle Bachelet embarked on reforms and politicians put an end to the Binomial law have all contributed to diffuse such a threat and minimize the risks. FA will be playing inside the mainstream institutional architecture as of now. And they will require a period of a learning process to find this "common ground" with other progressive voices, on the long-term vision to hit sustainable growth and inclusion.
What are the opportunities?
Convergence on the social, safety net
Center-right candidate Sebastián Piñera and center-left candidate Alejandro Guillier are fighting for the presidential seat in a second round, which looks highly competitive and difficult to forecast, but interesting to analyze, as the presence of Frente Amplio plays a pivotal role in how these two candidates frame their programme to attract voters from the political center and attract those still undecided. The opportunity side lies in the race itself, as both candidates are making programmatic efforts to enhance their overarching political umbrella to seduce voters on key areas that matter most to Chileans and that are the key drivers to secure governance, enhance growth and strengthen social cohesion. In other words, we are witnessing a rhetoric approach displaying an unprecedented convergence on the need to reform pensions, on a pledge to maintain gratuity in higher education and push for enhanced growth. If - in the past - candidate Piñera was openly against gratuity in higher education, today he has publicly compromised to maintain the 50/60% free access secured under Bachelet's administration (Piñera's recent convincement led him to claim that he now believes in gratuity for poor students, as long as the economy grows. Good news is that there are already official reports pointing to an economic recovery for Chile, "regardless of who wins the elections")
Such convergence on gratuity is the result of new economic accords reached under a different set of social and economic preferences, under Bachelet's Reform Agenda (2014 - 2017), and in the wake of relentless students' marches and protests reaching a peak in 2011 under Piñera's first administration. The new institutional accords to narrow disparities and now the candidates' convergence on gratuity can potentially grant "de jure" power to fund education for the most vulnerable in society, an unprecedented transformation in the history of a 25-year political cycle in the country. With the scrap of the Binomial law and a new electoral reform, the new distribution of forces is helping to re-shape the political equilibrium into a new outcome, in a period of transformation, away from status quo of transition times (1989 - 2013)
Furthermore, and in those cases where both candidates diverge i.e, to cut taxes to alleviate business (Piñera's program) or a hike in taxes for the "super-rich" to pay for universal gratuity (FA and possibly Guillier?), Country Risk Chile believes that the former could trigger a serious backlash (more protests and mobilizations) and the latter could hinder the pro-investment sentiment if not intelligently negotiated. With the new composition of forces in Parliament, to "perfect" the technical aspects of the current reforms and legislation seems the only viable course of action.
A new Parliament
And let us remember that no force will have a majority in Parliament now. A strategic outlook at the new composition of Parliament in the lower house (Cámara de Diputados) features that center-left "Fuerza de Mayoría" obtained 43 seats (PS, PC, PR, PPD) and "Convergencia Democtrática" obtained 14 seats (Christian Democracy plus IC and Mas Region). The Regionalist green movements obtained 4 seats. Centre-right Chile Vamos coalition obtained 72 seats (Renovación Nacional, 36 and UDI, 30 seats). Christian Democracy and ex-president Ricardo Lagos's PPD have lost seats and will see their share of state funds reduced for campaigns. For more details, visit SERVEL data.
Country Risk Chile believes this should be seen as an opportunity to bring all democratic voices to find "common ground" in what Rawls calls the "overlapping" consensus of political forces. Such consensus-principle in policymaking has been the hallmark of 25 years of democracy in Chile, but now it is qualitatively different. It is an opportunity to implement a looking-forward vision plan, into the challenges of the 21st century, such as green growth, sustainable growth, improving the safety net, and in accordance to the "bringing-all-Chileans-on-board" report by the OECD, 2015.
A long-term vision is needed to steer the country into enhanced prosperity. And it is the key to smoothly navigate into the challenges of transformation Chile is undergoing. Kant and Hegel refer to the moving path of history, as change and transformation which inevitably occur; therefore these elections results should not be perceived as a total surprise.
The Risks:
With no political force as a majority in Parliament, such strain on the consensus-principle in policy-making in the last 25 years of democracy is qualitatively different and poses some risks deriving from the potential of beliefs and abilities in political leaders to adapt to change and transformation. Country Risk Chile's analysis will stretch to the frontier of political science, where the "psychological" viewpoints help to better explain how this political outcome will confront the "heuristics" of Chilean politics. First, FA has the potential to further trigger the conservative "nostalgia" of the glorious days of the copper-related era. This nostalgia had surged with Bachelet's reform agenda which was carried out against the backdrop of the end of the supercycle of commodities, low record copper price and a diminished growth (compared to an average of 5,5% during the supercycle) prompting fears in the economic elite that economic slowdown was more down to reforms than external factors. This nostalgia for what it used to work so well in Chile to boost the economy, the technocratic drive to boost growth and development, is the Ulysses siren calling for "old days were better" when transformation and change are taking place, and therefore it should not be a surprise, then, to hear Piñera, for example, refer to Bachelet's administration as an inefficient government that neglected economy and that a 2nd transition is needed to steer the boat afloat to hit growth once more. According to Schneider and Doner (2016) on the middle-income trap (more politics and economy), this nostalgia is explained as intrinsically part of the challenges of institutions when the economy of MIC countries reach the technological frontier and have excessively relied on the sales of commodities and raw material exports to boost the economy. Beyond the frontier, advanced human capital and technological products are huge challenges to confront in order to reach the innovative phase Chile requires. The trap is to stall on what really worked before - or advance into new formulae.
FA has also the potential to trigger the left wing's "fear" (or risk-aversion) to repeat the same political mistakes that brought Chile to the polarized atmosphere leading to the coup; lessons were learned in exile and the common view was that the new left had to moderate and modernize in the light of capitalist hegemony (Huber et al 2010). Pragmatism led the left to be "fearful" of the hyperinflation of countries like Argentina on the return of democracy in the region, so macroeconomics concerns became careful macroeconomic management (Fernandois 1995). It was pragmatism that enabled Chile to attain its successful path to democracy in Chile after the 1988 referendum. And it was moderation that led the Chilean left project to attain more than its more radical counterparts in the region (Weyland, Kurt 2010).
Pressure from the FA coalition on the omissions and shortcomings of the center-left Concertación por la Democracia coalition which ruled over 20 years ( 1989 - 2009) on bolder measures to impede growing disparities, could trigger the "guilt" sentiment for not ameliorating inequality, or lamentation that during transition times bolder, more decisive actions were omitted to narrow the gaps and therefore Nueva Mayoría's left forces might fall prey to extortion. Country Risk Chile has monitored Alejandro Guillier's approach to capturing the FA electorate as well as his strategy to bring back Christian Democracy (they broke away from the NM coalition by presenting their own candidate to presidential elections and skipping the NM primaries due to their criticism of a left hegemony in the historical coalition). NM's Alejandro Guillier's economic advisor Escobar has stated in a leading conservative newspaper that "if one believes in social progress, the approach is not anti-market". Escobar emphasized a new tax reform was not sustainable and taxing the super-rich (1%) as the FA coalition had suggested was "good framing but not good public policymaking".
The reality is that macroeconomic constraints will continue to rule much of the budget planning to support the safety net. If the Nueva Mayoría unites forces with FA on an overarching agreement to pass progressive legislation, such agreement will require that the FA abandons any anti-systemic approach for a collaborative one to support progressive reforms. The old dichotomy of pragmatism versus ideology should give way to a forward-looking approach to elicit talented policy-making in the name of inclusion and growth, away from the copper-related paradigm
A call for talent (-ed solutions)
Country Risk Chile understands that the country is definitely moving into post-transition times: the 4 years of reforms under Bachelet administration have helped tilt the political distribution of power. Now the 3 forces represented in Parliament will translate into the additional strain to find common ground to pass legislation. The consensus principle in policy-making in Chile - the political capital of transition times - will be qualitatively different in the sense that in order to find common ground, the strain will be put on the quality of technical argumentation to converge on "enhanced progress". Under the binomial law, the consensus principle did apply. During the administration of Bachelet, the bi-cameral composition (center-left, center-right) turned the ideological debate on reforms into an ideological battlefield, and into a highly polarized one. Now, this 3rd force, with the presence of the Frente Amplio coalition, will compel traditional center-left and traditional center-right to choose to argue either with "nostalgia", "fear" or "guilt" or take recourse to an extraordinary ability to push for " forward-looking" policies within a market-friendly environment but with room for creative destruction or ample leeway for more competition(SME's)
The success will depend largely on this talent-related pool that they bring to the discussion. Solutions will depend on innovative ideas, away from the copper-related paradigm, less orthodox and creative to advance to enhanced prosperity and into the 21st-century challenges as AI, climate change, education, the safety net and away from the negative impact of the local structural heterogeneity (Solimano, Sunkel, Ffrench Davies)
Soledad Soza, December 10, 2017
