Rewriting a legacy: Chile’s constitutional referendum
WHAT’S HAPPENING?
After a month of protests and unrest in Chile, the government has agreed to hold a referendum in April 2020, allowing voters to decide if a new constitution is needed.
KEY INSIGHTS
– Protests and violent unrest have paralysed Santiago and spread throughout Chile
– President Piñera’s concessions have not been sufficient to quell unrest over inequality, inadequate public services and the high cost of living
– The announced referendum is a historic moment for Chile, but unlikely to resolve demands for immediate social spending
Chile has generally been considered one of the most stable and prosperous countries in Latin America. However, the country has not escaped the unrest that has recently exploded across the region. Protests broke out in early October in response to a rise in metro fares in Santiago. This soon spiraled into a widespread movement to reform the state system and combat rising inequality. While Chile’s free-market policies have produced relative economic success and a significant decrease in poverty, Chileans feel underserved by the state and deprived of adequate public services.
Protests became violent on 18 October, when rioters set fire to buses and metro stations, barricaded the streets and clashed with police. President Sebastián Piñera responded by declaring a state of emergency, setting a curfew in Santiago and sending the military into the street for the first time since the end of Augusto Pinochet’s dictatorship in 1989. What began as a peaceful movement quickly became destructive with widespread arson, destruction and looting. According to figures from Chile’s human rights institute, at least 20 people have died and over 2000 have been hospitalised. The damage bill has been estimated at $2 billion. Piñera was forced to cancel two high-profile international summits set to be held in Santiago later this year as violence continued.
Piñera quickly rolled back the fare increase and announced further concessions, including a boost to the minimum wage, higher public spending on pensions and a reversal of recent rises in electricity prices. However, protesters have maintained that his actions are too little too late, and have called for a complete overhaul of the constitution to replace the one approved by Pinochet in 1980. This sought after change would enshrine social rights, such as the right to state benefits, including healthcare and pensions.
With few options left on the table, Piñera has agreed to initiate this process. Last week, Chile’s government announced the Agreement for Social Peace and a New Constitution. This has paved the way for a constitutional referendum in April 2020 that will allow voters to decide if they want a new constitution and, if so, who should draft it — members of Congress or elected Chilean citizens.
WHAT ARE THEY FIGHTING FOR?
The movement has no clear leader and spread largely through social media. It encompasses some ultra-left groups that oppose free-market capitalism, but is mainly comprised of ordinary Chileans who have joined the movement to protest the high cost of living and growing inequality. Protests that began with a transport tariff have expanded to encompass the healthcare system, public education, pensions and a number of other grievances. Additionally, inequality is on the rise. A survey by the social development ministry found that in 2017, the income of the wealthiest 10% of households was 39.1 times higher than that of the poorest 10%, up from 30.8 times in 2006. While this gap remains smaller than the Latin American average, it is also 65% larger than the OECD average.
Many of these complaints pre-date Piñera’s presidency. Chileans organised mass protests over the quality and cost of education in 2006 and 2011, and over inadequate pensions in 2016. However, current demonstrations reflect a greater middle-class movement that is targeting the entire system, which they view as unfair. This wave of protests has erupted so aggressively partly because of successive governments’ historic lack of action. One protester told the Wall Street Journal, “I’ve protested since I’ve been in high school, trying to bring about change in a peaceful way like the government says, and we never achieved anything.”
After initially meeting the fare protests with a heavy hand, Piñera attempted to appease demonstrators with concessions that will cost the government $1.2 billion, or 0.4% of GDP, and a promise to raise taxes on top earners. He also replaced eight of his cabinet members to bring fresh faces to the government, before finally agreeing to constitutional reform early last week. However, his initial proposal for a group of legislators to decide on the new text was at odds with protesters’ demands for direct citizen participation in the process. The president’s approval rating has dropped to 14%, a record low for any president since the democratic transition, and his ability to govern is increasingly in question.
TOWARDS A NEW CHILEAN MODEL
Protests are not showing signs of dispersing anytime soon. Demonstrators are chanting, ‘it’s not about 30 pesos, it’s about 30 years’, and ‘Chile is waking up’, as they refuse to accept their circumstances any longer. For many on the streets, these chants reflect their demands for fundamental political reform, and in most cases, Piñera’s resignation.
Piñera, a centre-right businessman, has spent his presidency selling Chile as a stable and prosperous nation for foreign investment. The recent turn of events has shattered this reputation. The cancellation of the two summits sent a clear message abroad that will likely hinder investment and cripple the economy. Amidst the protests, the economy is functioning at ‘half-speed’. Growth forecasts are down, the stock market has fallen and fears of recession and rising unemployment are growing. Piñera’s campaign promises to boost the economy are looking more and more dismal.
Polls show that many Chileans believe that the country’s democracy is rigged in favor of a small elite, and Piñera symbolises this elite. This reveals a potentially worrying growth in populist sentiment. The protests suggest that the economic consensus and state model that has produced relative success since the fall of the Pinochet dictatorship has potentially run its course.
The referendum is a historic moment for Chile, as power appears to be shifting towards the hands of the middle class. However, while it is an important first step, it will be a drawn-out process, with the new constitution not set to be drafted until October. This will do little to satisfy current demands for immediate social spending. Recent polls reveal that 78% of Chileans want a new constitution, but the majority of their grievances will not be solved by a new text. Many of the factors fueling protests have built up over generations and will likely require years of economic and social reform.
Economists are concerned that Chile cannot afford to meet protesters’ growing demands. The country’s fiscal resources have stagnated at 20% of GDP, compared to the OECD average of 34%. Concessions to raise the minimum wage and increase pensions from these funds will fail to reduce inequality without long-term structural changes. The question remains, what will be the political and economic compromises necessary to achieve these changes? While there is momentum to provide better social safety nets and state services, the announced referendum does more to buy time for Piñera than to truly resolve current issues.
The announcement served to quell some economic and investment fears, but the political guarantee will likely not be enough to calm social unrest. It remains to be seen what a new ‘Chilean model’ may look like, but the uproar over inequality is far from fading.
