Chile’s Piñera: Seeking To Bring Back the Chilean Miracle
President Sebastián Piñera discusses his plans for reenergizing Chile’s economy.
Sunset cast a reddish glow on the snow-covered Andes in the distance while the damp cold of the southern-hemisphere winter permeated the corridors of La Moneda, the austere 18th-century presidential palace. In his office, behind a desk dominated by three oversize computer screens, President Sebastián Piñera met recently with Institutional Investor Senior Contributing Writer Jonathan Kandell to discuss his plans for reenergizing Chile’s economy.
Institutional Investor: How has the earthquake changed your policy agenda?
Piñera: It had a very significant impact on our agenda. It was the fifth-worst earthquake on record. We lost almost one out of three schools, 79 hospitals — or about a third of our total hospital beds — and 200,000 homes, and suffered damage to many bridges, airports and ports.
And, of course, in human lives the cost was very high. During our first months in office, we focused our efforts on repairing the most urgent damage. And we were extremely successful. In 45 days we got every student back in school, built 70,000 temporary homes, and restored public health services, airports, ports, bridges and highways.
What’s next on your economic agenda?
We want to recover the 12 years of lost time in this country. From 1986 through 1997 we had 12 years of fat cows. Our average annual growth rate was 7.5 percent, and we created 100,000 jobs per year. Unfortunately, since 1998 the economic situation changed dramatically. Chile got used to harvesting without planting enough. So we have had 12 years of lean cows. Average annual growth dropped to 3.5 percent. Investments and productivity fell. And our capacity to create jobs was cut in half. Our main economic objective is to recover Chile’s ability to grow and create the necessary jobs and to restore the dynamism of investments and exports. Last year the economy shrank by 1.5 percent. This year it will grow by about 5 percent, and next year by more than 6 percent. Last year we lost more than 30,000 jobs. This year we will create more than 250,000 jobs.
How can Chile make its voice heard more clearly in a region with larger and louder countries like Brazil, Mexico, Argentina and Venezuela?
We are a small country of only 17 million people, far away from the most important industrialized nations. So, I think the best way to make noise — to make Chile’s voice heard abroad — is to show other countries that we have a strong democratic system and a high-growth, innovative, job-creating economy that will eventually end poverty and make us a developed nation.
Has there been a long-term political shift to the right in Chile?
Left and right have become obsolete terms in Chile. People are more willing to judge a government by its results not its promises. Voters got tired of Concertación [the center-left coalition] because, while it had good intentions and made good speeches, it failed to deliver on economic growth, jobs, health and education. We won because we represented change. Electing an entrepreneur like me would have been impossible to imagine a few years ago.
By trying to raise additional taxes and royalties from mining, aren’t you changing the rules of the game in this crucial sector?
We are a serious country that honors our commitments. We are not changing the rules. We are proposing a new, voluntary alternative. We will give the mining companies tax stability for a longer period of time if, in exchange for that, they agree to give up a fixed tax or royalty rate for a variable royalty rate. This means that when copper prices and revenues are high, they will contribute more taxes not only for the reconstruction of the country after the earthquake but also for economic development. And when copper prices fall, the companies will pay less.
How will your economic and social policies differ from those of the previous, center-left government?
First of all, we want to start innovating again and strengthening our entrepreneurial spirit. Second, we will double our investment in science and technology, which is only 0.7 percent of GDP right now. Third, we will carry out major structural changes in our health and educational systems, creating incentives to improve the standards of our health care and education professionals. Fourth, we will dramatically change the ways we fight crime. Though we have lower crime rates than other Latin American countries, opinion surveys show that for many years Chileans have considered crime the country’s biggest concern.
Why did you reject calls by the Catholic Church for a blanket amnesty for people convicted of human rights violations during the dictatorship of General Augusto Pinochet?
First of all, Pinochet is part of the past. We have been living in a democracy for the last 20 years, and I am much more concerned about the future than what was done in the past. But I thought the best course was not to declare a blanket amnesty. I wanted to deliver a strong message that we will protect human rights — for everybody and in every circumstance.
I am, however, willing to use my powers as president to grant amnesties on a case-by-case basis, under very restrictive circumstances, to persons suffering from terminal disease or of a very advanced age.