Friday, February 19, 2010

The moderate right in charge of Government in Chile:Its real meaning

The presidential election results in January 17th 2010 , will be considered another historic day, just like that one ,when for the first time a woman was elected to be President(2006). It looks like Chile has learnt to work upon a long run span, quite unusual for countries like the Latin Americas ones which for most of the twenty century , hardly were able to cope with day by day challenges. Chilean voters have elected Mr Sebastian PiƱera a business man, to be the next President of Chile.
Now is all about expectations with the new Government which it will take oath next march 11th After 52 years, and leaving aside the exceptional period 1973-1990, the so called conservatives forces will be in charge of Government again. The exceptional circumstances of having gone through a recession, has made more significant this result: In times on recession people has voted for the moderate right.
A couple of considerations about this event and its long term implications:
a.- It was not a surprised at all, the electoral defeat of the current Government coalition, after 20 years in power, due mainly to lacking of new ideas and innovative proposals to cope with today Chilean economy ´ challenges. After a very successful integration into the international markets, based on the Free trade agreements (more then 60 in 20 years), recently upgraded by Chile {s admission as a new member of the economic European association, the next step is the more difficult one because it requires deeper reforms on the State management model, specially the way it deals with incentives to small business and investment, productivity increases and competitiveness improvement . A recent report done by a the World Bank ,indicates that Chile has a disadvantage in logistic cost compared to some of its competitors,(Australia, New Zealand).Besides as a percentage of the GDP the logistic cost in Chile represent 18%, twice that one from the European Countries (9%).The whole process of preparing the trade (export-import) documentations ,take in Chile 21 days while in New Zealand it take half that period. Another study done by the European organization for development and economic cooperation, has signaled the importance of more flexible labor markets and better educational setting. All of these challenges are by its nature, long run kind of task. This lead us to the second consideration.
b.- Chile has been steadily making economic progress since the mid eighties, increasing its GDP per/capita form USS 5000 in 1980,up to more than USS 12000 in the year 2005,but with a 70% negative gap compared to that one of developed countries(50% because of lower labor productivity).Thus, any additional achievement on development status requires better policies on labor regulations, taxes, and efficiency of public policies. At the same time, this economic progress has allowed to decrease poverty (12%), and improve expectations about future standard of living .People feel they have the chance of living better, with better access to buy assets like either a car or an house .As a consequence ,there are a new emerging middles class which also demand better education, health services and safety on streets. The new Government, will have the challenge of meeting those expectations. So far, it looks like it is up to it.