Executive Summary

Maturing beyond development assistance
In accordance with the decision of the Development Assistance Committee (DAC), Chile left the group of countries eligible for Official Development Assistance (ODA) in October 2017. There is no doubt that this “graduation” reflects the economic and social development the country has undertaken during the past two decades since the return of democracy. But despite this sound macroeconomic performance, Chile is still facing structural challenges which impede equal participation in economic growth and the active claim of social rights, especially by the more vulnerable population.
Polarization impeding reform
Strongly polarized political discourses and positions, which are still marked by an ideological division inherited from the Cold War and Augusto Pinochet’s military regime, in combination with high constitutional barriers to implementing structural changes have impeded essential pension reforms and efforts to decentralize. In addition, the country has not managed to significantly reduce poverty levels or close the gap on income inequality.
Political history promotes conflict avoidance
The prevailing legacy of Augusto Pinochet’s military government must be taken into account in any evaluation of the country’s democracy and governance. Turbulence under the Salvador Allende government and subsequent military dictatorship led to a political culture that favors consensus and avoids conflict. Key actors and citizens generally tend to favor the status quo and harmony. Nevertheless, social tensions are rising in the OECD’s most neoliberal country. Official and unofficial strikes as well as protests lead to violence and police repression with relative frequency. Student protests of recent years appear to be have replaced by protests against the pension system, and the indigenous conflict in the country’s south has worsened.
Serious corruption across government
Strongly agitated by several far-reaching corruption scandals that involved both right-wing and left-wing politicians and parties, Chile’s traditional political camp pattern seems to have changed significantly for the first time since the return to democracy in 1990. Some serious cases of corruption involved representatives of important state institutions, including the national tax authority, the police and the military, which have been evaluated in public opinion polls during the past twenty years as among the most trusted institutions. Political institutions have a bad reputation because it is widely known that many of the current influential political and economic actors are interrelated due to direct family bonds or business relations. Also, public officials tend to abuse their position by sharing high-level political and administrative posts only within this very limited oligarchic circle. The government has responded to recent corruption scandals by introducing more restrictive regulations on party and campaign-finance. Nevertheless, political disaffection is growing. Participation in the October 2016 communal elections dropped to a historical low of 35%, a clear indication of widespread discontent among the Chilean population, irrespective of their political background.
Growing political discontent
All these aspects explain the growing discontent with national politicians and politics in general, especially among the younger population and in middle-income households – a development that notably influenced the 2017 presidential elections.
Chile is a particularly heterogeneous country, yet economic and political power remains highly centralized in the capital Santiago. Consequently, regional and local interests are often not sufficiently reflected in national policymaking. Also, unresolved ethnic conflicts often trigger a response by the state that, at times, fails to respect the civil and political rights of ethnic minorities (e.g., the Mapuche). In addition, certain forms of political discrimination inherited from the military dictatorship remain. For example, convicts with a prison sentence exceeding three years are barred from voting. Furthermore, convicts with less severe sentences and individuals in custody are de facto excluded from suffrage as institutional structures do not provide the necessary internal procedures to guarantee their constitutional right to participate in elections.
Stable system has dampened participation
The downside of Chile’s relatively stable political system has been low citizen participation in politics. The country lacks mechanisms of direct democracy and citizen participation that could promote citizens’ interests as well as public (vertical) accountability. Even the media is unable to fulfill its role as the fourth estate. Chile’s oligopolistic media system shows strong biases in the expression and depiction of various political, social and economic positions. This constrains pluralistic public debate, especially on highly ideological topics such as economic inequality and the country’s military past. Nevertheless, both the audit office and congressional control over the government work quite well (horizontal accountability).
Economy tied to
copper’s swings
Although Chile’s economy and gross income per capita have consistently grown over the last decade, the country remains extremely dependent on copper exports. Consequently, Chile is highly vulnerable to instability in this commodity’s international price. Also, poverty rates and wealth inequality did not show significant changes during the period under review. According to the Gini index, Chile’s degree of income inequality is among the most extreme in Latin America.
Positive outlook for scaled-back reforms
In general terms, the government under President Michelle Bachelet has continued to pursue its reform ambitions. However, several reform needs have not been thoroughly addressed and implemented reforms have often had to be significantly scaled back in order to win congressional approval. Nevertheless, the reforms that have been successfully introduced (especially in the field of taxes, education and the binominal election system) might prove to serve as cornerstones for the country´s positive development in the long run.
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