[Mb-civic] An article for you from Michael Butler.

Sun Mar 12 14:18:58 PST 2006

- AN ARTICLE FOR YOU, FROM ECONOMIST.COM -

Dear civic,

Michael Butler (michael at intrafi.com) wants you to see this article on Economist.com.

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CHILE
Mar 9th 2006  

A brave new dawn for Latin America's most conservative country

THERE is no doubting the star quality of Michelle Bachelet. The woman
who will be sworn in as president on March 11th has already altered
Chile's idea of itself. The great economic success story of Latin
America has also long been seen as its most socially conservative
country. Ms Bachelet, however, is an agnostic separated mother of three
children who hails from the left-wing of the Socialist Party and spent
years of exile in East Germany. Can she strike a successful balance
between change and continuity? 

Ms Bachelet will head the fourth successive government of the
four-party centre-left Concertacion coalition, which has ruled since
the end of the dictatorship of General Augusto Pinochet. The
Concertacion kept the dictatorship's free-market policies which,
eventually, brought rapid economic growth, but matched them with more
effective social policy. Chile enjoys policy stability and political
consensus of a kind that is rare in Latin America, so radical change is
not in store. But the new president has promised to govern in a more
open way, with more say for citizens' groups and less for political
parties.

That spirit of openness is reflected in the composition of her cabinet.
This belies her political origins. Only two of its members--Andres
Zaldivar in the interior ministry and Alejandro Foxley, the foreign
minister--have previous ministerial experience. Half are women,
fulfilling an election promise. Several ministers do not belong to a
party. They include Andres Velasco, a Harvard economics professor, at
the finance ministry. He is one of several liberal technocrats in the
cabinet who, like Ms Bachelet, speak fluent English. The new team has
more PhDs, MBAs and business experience than its predecessors. "They're
global citizens," says Gonzalo Larraguibel of McKinsey, a management
consultancy. 

Ms Bachelet herself is a relative newcomer to politics. She became the
Concertacion's candidate not as a result of a traditional slog through
the party machine, but of the sudden popularity she acquired as health
and then defence minister under Ricardo Lagos, the outgoing president.
She is likely to rely heavily on Mr Zaldivar, a Christian Democrat who
held his first government job in the 1960s and who may, in practice,
play the role of prime minister. 

The new president inherits many advantages. Helped by the high world
price of copper, which accounts for 45% of exports, the economy is
growing at 6% a year. In winning the election in January, Ms Bachelet
was helped greatly by the popularity of Mr Lagos, another socialist.
Unlike her predecessors, she will have a slim majority in both houses
of Congress, thanks to a reform which abolished nine non-elected
senators bequeathed by General Pinochet. But that reform also cut the
presidential term from six years to four. 

The question now is whether her clever technocrats have the experience
and patience to work with a leisurely civil service, which is only just
starting to be professionalised. Or to sit through public debates on
issues to which they already have the answers--or indeed to work
effectively with the Concertacion's professional politicians, many of
whom, like Ms Bachelet, spent years of exile in socialist countries.

For all Chile's successes, these new and untested politicians face
several complex challenges. To sustain economic growth as well as to
create a fairer society Chile needs to improve its education system,
which currently fails the poor. Another priority is reform of the
privatised pension system. That involves striking a balance between the
economic liberalism of her technocrats, who favour more competition
among pension providers, and the demand of some Concertacion
politicians for harsher regulation. 

A third challenge is to secure the energy Chile needs for growth.
Argentina has cut its exports of natural gas to its neighbour. One
alternative involves building four hydroelectric dams in a pristine
area in the south. That would guarantee a clash with greens. Ms
Bachelet courted them during the election campaign with the promise of
a new environment ministry with regulatory teeth. Another possibility
would be to import gas from Bolivia. But that requires an ambitious
effort to settle a century-old demand by Bolivia for access to the sea.

The new president has said that she would like to be remembered both
for what she achieves and for how she achieves it. That is a tall
order. To secure change, boldness will have to be tempered by
compromise, and citizen democracy with professional politics.

See this article with graphics and related items at http://www.economist.com/world/la/displaystory.cfm?story_id=5609367

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