Daily Archives: 31 July, 2010

Tycoon Piñera promises rapid growth for Chile

Having won Chile’s presidential election by a narrow margin, billionaire businessman Sebastian Pinera must now chart the country’s future for the next four years

But when he takes over from President Michelle Bachelet on 11 March Mr Pinera will, in many ways, inherit a relatively easy country to govern.

Chile’s per capita gross domestic product (GDP) is among the highest in the region and the country boasts a long and strong democratic tradition – despite the notoriety of the military dictatorship of Gen Augusto Pinochet in the 1970s and 1980s.

It is the least corrupt country in Latin America and one of the most stable.

The Chilean poverty rate has plummeted from 39% when Gen Pinochet stepped down in 1990 to less than 14% now – the biggest drop anywhere in Latin America.

Just this month, Chile became the first country in South America to join the OECD, the club of the world’s wealthiest, most developed states.

Bold promises

Mr Pinera also has the benefit of cash in the bank.

Between 2005 and 2008, when money was pouring into the country from the sale of its chief commodity, copper, Chile racked up combined fiscal surpluses of $42bn (£26bn) – equivalent to a remarkable 26% of GDP.

Mrs Bachelet has spent some of that money to offset the impact of the global economic crisis but there is plenty left over, and with the all important copper price creeping back up towards historic highs thanks to incessant demand from Asia, the prospects for the Chilean economy are bright.

They will need to be. Mr Pinera has vowed to deliver an annual growth rate of 6% over the next four years and one million new jobs – bold promises in a country with a work force of less than nine million.

Whether he is able to keep those promises will depend largely on the price of copper, which accounts for more than half of Chile’s export revenue.

The most immediate challenge Mr Pinera faces is what to do with his personal wealth, estimated at around $1.2bn.

Most of that money is held in shares in national airline LAN, and Mr Pinera has vowed to sell them before he takes office in order to avoid a conflict of interest.

If he handles that process with anything less than full transparency the centre-left opposition will pounce on it as proof of what they have alleged all along – that Mr Pinera is a voracious businessman who is not to be trusted with the public purse.

Aside from his LAN shares, Mr Pinera also owns important stakes in a Chilean TV channel and the country’s most successful football club, prompting many to compare him to Italy’s Silvio Berlusconi.

But while it is true that the two men have similar investment portfolios, they have very different characters.

Family man

Mr Pinera lacks the Italian’s easy-going populism, and sometimes cuts a slightly awkward figure in public.

Aged 60 and married with four children, he is the archetypal family man.

Once in office Mr Pinera faces a balancing act within his own coalition, the Alliance for Chile.

He himself belongs to the centrist National Renewal party, but the majority of his members of parliament belong to the larger, more conservative Independent Democratic Union (UDI). There’s a change in the pilot but the country will continue on the same route
Professor Patricio Navia

If Mr Pinera’s party emerges as the dominant force, Chile’s government will be pretty moderate, but if the UDI dominates, it will be much more conservative.

Many members of the UDI openly supported the Pinochet regime and are guided by their deeply held Roman Catholic beliefs on issues like abortion and gay rights.

“It’s going to be interesting to see which of these two elements holds sway,” said Marta Lagos, director of polling unit MORI Chile.

“Will it be the president, who is a liberal at heart, or will it be these more conservative forces that accompany him in his coalition?”

The very fact that Chileans were prepared to elect Mr Pinera suggests that the Chilean right is finally emerging from the long shadow cast by the Pinochet era, when more than 3,000 people were killed in political violence and 28,000 were tortured.

For two decades, the right was tainted in the eyes of many Chileans by its association with those human rights abuses.

But as memories of those dark days fade and a new generation of Chileans emerges, the electorate is gradually overcoming its fear of the political right.

Pressing issues

Mr Pinera was studying in Harvard at the time of Gen Pinochet’s coup in 1973, but came back to Chile three years later, making his fortune by pioneering the sale of credit cards.

He opposed the Pinochet regime, but his brother was a minister in it and, in the transitional election of 1989, Mr Pinera campaigned for Pinochet’s candidate.

That has led some to question his commitment to democracy, but he has largely addressed those questions by presenting himself as a moderate who is not about to instigate any radical swing to the right.

“There won’t be any big changes in terms of policy,” says Patricio Navia, a professor of political science at Santiago’s Diego Portales university.

“Chile will remain on the same road map – a market-friendly economy with a focus on social spending for the poor. There’s a change in the pilot but the country will continue on the same route.”

Among the more pressing issues that Mr Pinera faces are Chile’s poor educational standards, rising crime and a yawning gap between rich and poor that exists despite the country’s overall prosperity.

He has promised to put more police officers on Chile’s streets and to lengthen jail terms – this in a country that already has the highest number of inmates per capita in Latin America.

On foreign policy, Mr Pinera faces a lonely four years in office.

Much of Latin America has swung to the left in the past decade and he will find few natural allies in the region.

Relations with Chile’s northern neighbours Peru and Bolivia – already dismal – are unlikely to improve.

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China to invest $10B in Argentina’s railways

BEIJING (AP) – Argentina and China signed a deal for Beijing to invest $10 billion in the South American nation’s railways during a visit by the Argentine president but there was no sign of progress in a dispute over soy imports.

The agreements announced Tuesday during the visit by President Cristina Fernandez come as Beijing expands its role in Latin America through investments in oil and other industries and closer financial ties with the region’s governments.

The railway deals include a $2.5 billion project to upgrade the rail system of Argentina’s capital, Buenos Aires, Chinese news reports said. They said projects would include the purchase of Chinese railway technology.

China is promoting exports of railway equipment andis trying to develop its own high-speed rail technology. A Chinese railway official said in March that state-owned companies are building high-speed lines in Venezuela and Turkey.

There was no sign of progress in a dispute over China’s ban on imports of Argentine soy, a key export for Fernandez’s nation. The Chinese government played down the ban, calling it a normal trade dispute.

The soy dispute is the most pressing issue for Fernandez, who was on the first trip to China by an Argentine president since 2004.

The railway deals were among a dozen agreements announced Tuesday.

Others included a memorandum of cooperation state-owned China Petroleum&Chemical Corp., also known as Sinopec, and state-owned Energia Argentina SA, or Enersa. No details were released.

There was no word on a possible Chinese purchase of BP plc’s stake in Argentina’s Pan American Energy, an oil and gas producer. News reports say BP might sell its 60 percent share to state-owned China National Offshore Oil Corp., which owns 20 percent of Pan American and wants to expand abroad.

Argentine exports of soy oil to China totaled $1.4 billion last year, accounting for a sizable chunk of two-way trade that strongly favored Beijing.

China imposed the soy ban April 1, after saying it found shipments containing excessive levels of hexane, a potentially cancerous chemical used in soy processing. The restrictions also came after Argentina last year imposed antidumping measures on some Chinese goods.

China has denied the soy ban is a retaliatory measure, while Argentina has said its soy products are not contaminated.

When asked Tuesday by reporters about the soy dispute, a Chinese Foreign Ministry spokesman called Argentina an important partner in Latin America and said the problem should be resolved.

“Regarding the import of soybeanoil to China, it’s just a normal problem that comes with the development of trade and economic relations,” said the spokesman, Qin Gang. “I believe as long as the two countries follow the spirit of cooperation and mutual benefit and through friendly consultation, a proper resolution will be found.”

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