When Bachelet came to power in 2014, Chile was Latin America’s most successful economies and she was one of the region’s most popular political figures. Since then, things have taken a turn for the worse on both fronts. Annual GDP growth, which averaged around 6% per year between 1987 and 2013, is expected to come in at 2.2% in 2015. Meanwhile Bachelet, whose 62% share of the vote in the 2013 election was Chile’s most decisive democratic victory for more than 80 years, has seen her approval rating plummet to 20%.
Clearly Bachelet isn’t fully responsible for the slowdown in mining dependent Chile. The fall in the price of copper, its main export, has hit the economy and coincided with a general flight of capital from emerging markets. Yet her critics claim that the comprehensive reform package that she initiated upon election has discouraged investment and exacerbated the slowdown. There is no denying that the original reforms were extensive and would have represented the biggest structural change to Chile’s economic model for decades. The aim was to tackle inequality by creating new constitution, strengthening labour unions and making university education free. All of this was going to be funded by a new tax system that would aim to raise 3% of GDP.
Bachelet’s efforts to implement the reforms have run into difficulty. The tax reform was poorly crafted, and it is now waiting for several amendments to be debated in Congress. The labour reforms are facing a barrage of opposition from powerful business groups while on the other end of the political spectrum, students have criticised Bachelet for not moving the education reform quickly enough.
“In hindsight the economic slowdown probably made this the worst time for Chile to try to enact such far-reaching reforms…”
Bachelet is now being forced to water down the original reform proposals and bring in more business-friendly cabinet ministers, which is causing some of her supporters to lose faith. The image of her administration has also taken a hit from various corruption scandals, including one involving her son.
In hindsight the economic slowdown probably made this the worst time for Chile to try to enact such far-reaching reforms. Yet Bachelet could still have the last laugh. The fact that she won a landslide election victory on a reform platform demonstrated clearly that it’s what the Chilean people want. Approval ratings and political squabbles come and go, but if Bachelet does manage to pass the reform package, albeit a modified version, she would leave a lasting mark on Chile.