CHILE UPDATES #8
Leadership in Chile Will be Changing Hands
Leadership in Chile Will be Changing Hands
Date: July 12, 2013
It’s election year in Chile, the presidential primaries have just taken place, and it’s looking like Michelle Bachelet is going to be president next year.
Bachelet leads the Partido Socialista, a left leaning but fairly moderate party, and has already served a term as president from 2006 to 2010.
Chile’s current president, Sebastian Piñera, from the more economically conservative Renovacion Nacional party, will leave office in March of next year and with it looking pretty clear Bachelet will be taking over, I’ve been getting a lot of questions from people as to how this might affect business, investing, and life for foreigners in the country.
If you look at her platform for presidency, she says she wants to make reforms to the educational system and tax code and prepare a new constitution.
These are pretty big plans and some free market people are getting concerned about what this might mean for the country going forward.
My take on the situation is that if she’s elected, Chile will become a little less competitive in the world market, but that most of Chile’s strong points will remain completely unchanged.
Educational Reform
Students have been demanding more funding for public schools for the last couple years in Chile and Bachelet wants to give it to them.
While it’s true, more funding for schools will definitely increase government spending, some extra money being spent on education probably isn’t going to bankrupt the Chilean government anytime soon. Even if they started borrowing to pay for their schools, they could quadruple their debt load and still be much better funded than most “western” nations.
Tax Reform
Bachelet says she has plans for a “fairer” Chile which most likely means increasing corporate and upper income tax rates. Once again, I’m no proponent of these reforms and, if implemented, they will make the country less competitive in time but I’m honestly not that concerned about these proposals.
In the past couple decades, Chile has had a number of left leaning presidents but the economic motor of the country always gets by just fine.
Lots of natural resources (gold, silver, timber, water, ag land, etc)
A relatively small population
The growth of emerging industries (medicine, energy, tourism)
When you put all these together, it makes it pretty easy to improve infrastructure, fund social programs and still keep a balanced budget.
New Constitution
This one really is the most important and in some countries, talk of a new constitution would have me selling investments and considering other countries to call home.
In Chile, I don’t see this as all that threatening. Things are going well here in Chile, really well. The middle class is growing, life if noticeably getting better year after year, and the country’s strong physical and intellectual property rights are unlikely to change.
Some of the country’s economic development initiatives, medical breakthroughs, startup programs, etc. are actually just beginning to bear fruit and will continue to do so whether Bachelet is in office or not.
These are probably going to be the real game changers down here and will produce even more wealth than the country’s natural resources one day. The changing of the guard, so to speak, will probably be much more superficial.
Until soon,
Darren Kaiser
Bachelet leads the Partido Socialista, a left leaning but fairly moderate party, and has already served a term as president from 2006 to 2010.
Chile’s current president, Sebastian Piñera, from the more economically conservative Renovacion Nacional party, will leave office in March of next year and with it looking pretty clear Bachelet will be taking over, I’ve been getting a lot of questions from people as to how this might affect business, investing, and life for foreigners in the country.
If you look at her platform for presidency, she says she wants to make reforms to the educational system and tax code and prepare a new constitution.
These are pretty big plans and some free market people are getting concerned about what this might mean for the country going forward.
My take on the situation is that if she’s elected, Chile will become a little less competitive in the world market, but that most of Chile’s strong points will remain completely unchanged.
Educational Reform
Students have been demanding more funding for public schools for the last couple years in Chile and Bachelet wants to give it to them.
While it’s true, more funding for schools will definitely increase government spending, some extra money being spent on education probably isn’t going to bankrupt the Chilean government anytime soon. Even if they started borrowing to pay for their schools, they could quadruple their debt load and still be much better funded than most “western” nations.
Tax Reform
Bachelet says she has plans for a “fairer” Chile which most likely means increasing corporate and upper income tax rates. Once again, I’m no proponent of these reforms and, if implemented, they will make the country less competitive in time but I’m honestly not that concerned about these proposals.
In the past couple decades, Chile has had a number of left leaning presidents but the economic motor of the country always gets by just fine.
Lots of natural resources (gold, silver, timber, water, ag land, etc)
A relatively small population
The growth of emerging industries (medicine, energy, tourism)
When you put all these together, it makes it pretty easy to improve infrastructure, fund social programs and still keep a balanced budget.
New Constitution
This one really is the most important and in some countries, talk of a new constitution would have me selling investments and considering other countries to call home.
In Chile, I don’t see this as all that threatening. Things are going well here in Chile, really well. The middle class is growing, life if noticeably getting better year after year, and the country’s strong physical and intellectual property rights are unlikely to change.
Some of the country’s economic development initiatives, medical breakthroughs, startup programs, etc. are actually just beginning to bear fruit and will continue to do so whether Bachelet is in office or not.
These are probably going to be the real game changers down here and will produce even more wealth than the country’s natural resources one day. The changing of the guard, so to speak, will probably be much more superficial.
Until soon,
Darren Kaiser
