MercoPress. South Atlantic News Agency

Two ladies in the runoff for Chile's presidency, but Pinochet's legacy is still around

Michelle should be the winner, but does she have the negotiating capacity to have the pledged reforms approved

Two ladies and daughters of Air Force generals (but from opposite sides) will be disputing the run off on 15 December when the next Chilean president will be elected. Given the fact that on last Sunday's first round Socialist Michelle Bachelet was only three points short of a majority, and over twenty points ahead of conservative Evelyn Matthei there should be no doubts about who will be inaugurated at La Moneda next March 2014.

 Chile has been the showcase for international and multilateral organizations, and a magnet for foreign investment given its abundance of natural resources (king-copper), solid orthodox economics, open market, rule of the law, stable political system, legal security, business-friendly atmosphere and reliable foreign policy, plus sustained growth since dictator Augusto Pinochet stepped down.

But there is another side to the Chilean success story. First what happened on Sunday: 50% of the electorate remained at home, so despite Ms Bachelet's impressive 47% support, it was less than those who abstained. Furthermore with the conservatives divided, in retreat and with a last minute candidate (Matthei) since the first one stepped down, Ms Bachelet was unable to avoid the run off as she had pledged it was possible. The other presidential hopefuls are supported by small parties which if not anti-systemic severely question the bipolar (left-right) rotation and its results. Her alliance, the 'New Majority' is a catch-all movement which includes Communists and more highly active 'social movement” groups that have been promised fiscal and education reforms and for three years running clamored for education reform with massive support in street demonstrations that spoiled the four-year good economic report of outgoing conservative president Sebastian Piñera.

Secondly Chile is also famous for its steep inequality. Chile stands as one of the most economically stratified countries in the world. Economist and Nobel Prize laureate Joseph Stiglitz has stated that one percent of the country's population possesses one-third of its wealth, while a new study by the University of Chile cites a figure of 30.5%, compared to the 27% owned by the richest one percent in the US.

The gap between Chile's richest 10% and its poorest 10% is wider than any other country in the Organization for Economic Cooperation and Development (OECD), a group of 34 countries with developed economies. Over the last three decades, salaries have risen by an average of 15% for 90% of Chileans, compared to 150% for the richest 1%, according to Stiglitz. OECD also shows Chile has the worst higher-education access rates of the group.

No wonder then the massive street protest for free and improved education and dismounting a system based on universities 'for profit' which clearly favors the rich and condemns the rest of the Chilean society. And which Ms Bachelet has promised to dismantle in six years time.

However to implement the reforms Ms Bachelet needs a clear majority in Congress, where Pinochet's constitution and electoral system have worked as an effective clamp on reforms. In effect the electoral system gives the second-place party (conservatives) a bloated presence in Congress. And Bachelet's bloc only clinched the simple majority necessary to usher through a tax increase destined to fund the education overhaul. According to projections, the bloc will hold 68 of the 120 seats in the Lower House, and 21 of the 38 Senate seats, up from roughly 57 and 20 respectively.

In other words her coalition failed to secure the four-sevenths majority required for education reform, a hot-button issue which has triggered the massive protests. It also fell short of the three-fifths necessary for electoral reform and the two-thirds needed to strike down the Pinochet constitution.

These high majorities are nearly impossible to reach due to the electoral system, created at the end of the Pinochet dictatorship essentially to ensure the right would continue to wield significant power in Congress.

Experts and allies say Bachelet has since become a tougher negotiator than in her first period (2006/2010), but she will need every ounce of political dexterity to build support for her plans, which also include legalizing abortion in certain circumstances and same sex marriage.

Chileans are broadly behind Bachelet's plans: around 74% are in favor of making free higher education a priority and 51% want the binominal electoral system to be reformed, a recent CEP poll showed last month. But the trick will be ensuring social movements keep pressuring Congress - and do not turn against her.

Chile's electoral system has fueled frustration among many people who feel their demands cannot be met by a Congress that does not reflect their views. Divorce was only legalized in 2004, for instance. Some Chileans cast their vote in favor of Bachelet precisely because they think she represents the best chance for change.

But coming back to economics, Chile is synonymous of copper, the world's leading producer and exporter, and since 2002 the international price has increased fourfold (409%) thanks mainly to the insatiable avidity from China.

This year Chile is expected to produce 5.7 million tons of copper equivalents to 13% of GDP, 60% of exports and the mining industry absorbs half the foreign debt, to such an extent that the red metal is known as “Chile's salary”. Likewise having opened its domestic market so drastically and the constant appreciation of the currency have seen a massive inflow of imports seriously threatening local manufacturing.

According to a paper from the UN Economic Commission for Latam and based on 2011 stats, 95% of Chile's exports are concentrated in copper, wine, grapes, farmed salmon and fresh fruit.

”The most complex issue of the scenario is that most of copper exports go to an only client (China)“, said economist René Fernandez-Montt. Chile has gone through similar situations: ”in the XIX century saltpeter (potassium nitrate) was the main engine of the country's economy and virtually the only export. Once synthetic saltpeter appeared in the market, Chile went into an unprecedented crisis. Tomorrow copper could be replaced by 'technological advances', and that's the end of the party”.