Executive Summary

Despite progress, gaps on poverty, inequality remain
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 achieved since the return of democracy in 1990. Despite its sound macroeconomic performance, Chile is still facing structural challenges that impede equal participation in economic growth and the active claim of social rights, especially by the more vulnerable population. The country has not managed to significantly reduce poverty or close the income inequality gap, with both variables among the highest in Latin America and having shown no significant change during the period under review.
Open, high-income economy
Chile is a high-income economy, its gross income per capita has consistently grown over the last decade. It is also a highly open economy. Yet, the country remains extremely dependent on copper exports and, consequently, vulnerable to commodity price volatility.
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 have led to violence and police repression with relative frequency.
Cross-party corruption
has shifted politics
Agitated by several far-reaching corruption scandals that involved both right-wing and left-wing politicians and parties, Chile’s traditional political coalition groupings seem to have changed significantly for the first time since the country’s return to democracy in 1990. Several serious cases of corruption have involved representatives of important state institutions, including the national tax authority, the police and the military, which had been evaluated in public opinion polls over the past 20 years as among the most trusted institutions. Political institutions tend to 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. Moreover, 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 financing.
Political disaffection
on the rise
Nevertheless, political disaffection is growing. Participation in the October 2016 communal elections and in the November 2017 presidential elections dropped to a historic low of 35% and 46.7% respectively – a clear indication of widespread discontent among the Chilean population, irrespective of their political background. Discontent with national politicians and politics in general is especially strong among the younger population and in middle-income households – a development that notably influenced the 2017 presidential elections.
Highly centralized
power structure
Chile is a particularly heterogeneous country, yet economic and political power remain highly centralized in the capital Santiago. Consequently, regional and local interests are often insufficiently reflected in national policymaking. 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 voting 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).
Key reforms are
In general, several necessary reforms have not been thoroughly addressed and some implemented reforms have had to be significantly scaled back during the last legislative period in order to reach congressional approval. Nevertheless, the reforms that have been successfully introduced (especially in the field of education and of the binominal election system) represent a constructive change for the country’s development in the long run. So far, major reforms announced or already presented by the current government of President Piñera aim at economic growth, labor market regulations, taxes and the pension system.
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