Chile a country with a growing disappointed middle class, says Financial Times
The influential business newspaper Financial Times dedicated a special edition to the Chilean economic and social situation and concludes that given the massive demonstrations against energy projects and in favour of education reform, “doing business” in the country has become difficult plus there is growing disappointment in the middle class.
According to FT promoting energy or power projects has become difficult because companies are facing severe environmental hurdles and paralysis in Congress. There are ongoing protests and demonstration in cities and in rural areas against electricity power plants which are essential if the country is to retain its leading position in the exploitation of several minerals.
“Chile has been a role model for Latin America for the past 20 years” with the country standing out for rapid economic growth, social progress and political stability, but lately however “the shining image has taken a battering”, points out FT.
“The discontent has caught many by surprise and some have wondered if it is symptomatic of a citizen revolt against “the model” – a set of free-market and pro-business policies bequeathed by dictator Augusto Pinochet and that have been carried on ever since”.
But “the odd thing is that Chile is thriving: poverty has fallen from 40% in 1990 to about 14% now; real wages are rising and unemployment is at a record low. In 2010, Chile joined the OECD, a group of mostly rich nations and the fast growing economy has, so far, resisted the global slowdown” underlines FT.
Nonetheless Chileans are unhappy and the biggest problem seems to be that despite economic growth, Chile remains the most unequal in the OECD and among the most unequal in Latin America. The feeling is that “most of the country’s wealth remains controlled by a small clique of insiders who set the rules of the game”.
FT points to education with over a million university students, compared with just 200,000 in 1990 (and 70% of today’s crop is the first in a generation to go to college). The problem is that, unlike other OECD countries in which about 70% of education spending is publicly funded, in Chile only about 15% is. The rest is paid for privately by students and their families, many of whom are still relatively poor.
“Universities typically charge about 3.400 dollars a year (rising to 10.000 at the best colleges), versus an average Chilean salary of 8.500 dollars. Although the returns on education can be high, many universities are mere diploma mills of dubious quality”.
FT also indicates that another reason for disappointment is President Piñera: he is articulate, energetic and intelligent and in common with his closest regional ally, the Colombian president Juan Manuel Santos, he marries centrist policies with strong liberal instincts. Yet, unlike Santos, “even Piñera own supporters admit that he lacks a sure political touch”.
Finance Minister Felipe Larraín tried to explain “Chile’s disquiet as a sign of frustrated expectations”. The country, he suggests, may be “struggling to get out of the middle income trap”. This is a kind of Sargasso Sea of economic development. Over the past 50 years, only a few countries have got out – mostly by focusing on incremental improvements, such as higher productivity and better education”.
It is a hard slog. Yet, in many ways, it is also a problem of success. Over the past 20 years, Chile has vastly expanded its middle class. Now they have more sophisticated demands, and are not afraid to voice them.