Chile's Bachelet faces big challenges on taxation, education reform

Dec. 19, 2013 at 7:31 PM
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SANTIAGO, Chile, Dec. 19 (UPI) -- Michelle Bachelet, re-elected to a second term as Chilean president, faces major challenges seen likely to bring her into conflict with an entrenched and influential rich minority and businesses fearful of tax hikes.

Outgoing President Sebastian Pinera, elected 2010, promised to bring all Chileans into the 21st century -- rid the country of an enduring legacy of widespread poverty, huge income disparities and power of the privileged few. But his support evaporated after a magnitude 8.8 earthquake derailed his plans, and conservative policies alienated many among Chile's 17.5 million population.

Billionaire businessman Pinera was also disadvantaged because of his own privileged background, which played a part in diminishing his approval ratings after student riots over unequal education opportunities.

People from other economic sectors joined the protests and Pinera struggled to persuade entrenched lawmakers to approve radical reforms that could salvage his reputation.

In contrast, Bachelet, left office in 2010 after a four-year term with high approval ratings that helped her regain presidency, beating center-right candidate Evelyn Matthei, 60.

But Bachelet, 62, has set herself a tough, transformative agenda which sets a populist tone but has also sent alarm bells ringing in the business community with promises of higher taxes to fulfill her election manifesto goals. She takes office March 11, 2014.

Analysts see Bachelet's program, often described as left-wing or socialist but essentially a response to decades of neglect by rulers of both right and left, including former dictator Augusto Pinochet, whose long sway over power from 1973 to 1990 still casts a shadow on Chilean politics.

Former senator Matthei, a former minister of labor and social security in Pinera's government, was faulted for the sins of her father.

Fernando Matthei served in Pinochet's cabinet, led the air force and was a member of the dictator's military junta until Chile's return to democracy in 1990.

Chile's right, however, argues that it shouldn't be painted with a broad brush and not be punished indefinitely for association with Pinochet during his long dictatorship.

That smoldering ill feeling led to support for Bachelet at this month's poll being whittled down in business circles and influential wealthy classes, setting stage for future conflict, analysts said.

Paid-for education is a deep-rooted tradition in Chile, a privilege that those who can afford it see under threat with Bachelet's plans for state-aided universal education to university level.

Bachelet has vowed to be "president for everyone in Chile," a pledge she conveyed to Pinera when he called to congratulate her on her victory.

World Bank data rate income inequality in Chile high by international standards even as it has declined from a peak of 41 percent in 1987.

Differences in educational attainment account for almost a third of overall income inequality in Chile, and are by far the largest single explanatory factor, a World Bank report said.

"The social and political conditions are here and at last the moment has arrived," Bachelet said after winning 62 per cent of the vote in a runoff against Matthei.

"If I'm here it's because we believe that a Chile for everyone is necessary," Bachelet added. "It won't be easy, but when has it been easy to change the world?"

Top copper producer Chile has lived off a commodities boom and is channeling earnings from metal and other natural resources into finding oil and building industry. But progress has been slow.

Bachelet's solid majority in parliament gives her confidence she can push through reforms. But analysts say the president faces a hard fight ahead. While Bachelet talks of reforming education and taxation, the fight over Chile's Pinochet era constitution, which she has vowed to scrap, hasn't even begun.

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