Key Challenges

Lack of consensus has slowed reforms
Although Chile, an OECD member, has undergone a considerable and successful modernization process in recent years, it continues to face serious challenges in closing the gap to more developed countries, and the gap between the privileged rich and marginalized poor within the country. The former government of Michelle Bachelet only partially succeeded in implementing its ambitious political, economic and social reform agenda. A lack of consensus and financial resources (due to a decline in key commodity prices that determine the country’s macroeconomic performance) undermined wider reform aspirations on tax, labor, pensions, education and health care policies.
Long-term challenges:
Inequality felt across
social system
Political and strategic planning is being undermined by a lack of state capacities and instruments that would ensure policymaking adopts a medium- to long-term perspective, especially in the case of social, economic and ethnic issues. A lack of political and economic decentralization also hampers efficiency. Chile is one of the most centralized OECD countries despite its economic, geographic and ethnic diversity. Considering its stable macroeconomic performance over the last decade, neither poverty rates nor socioeconomic disparities have significantly reduced. Chile remains one of the most unequal countries in the region and the OECD. This has consequences for the whole social system, but the effects are particularly palpable in education, health care and the pension system. The lower-middle class is highly indebted and faces strong social pressure to consume. Many middle-income families struggle to maintain their living standards; if one wage earner loses a job or falls ill, families almost immediately have to significantly lower their living standard.
Education system perpetuates poverty
The enormous gap between the quality of the poorly funded public educational system (where per student expenditure tends to be less than half the OECD average) and its expensive private counterpart renders the elimination of structural poverty and socioeconomic disparities much more difficult. Additionally, the private educational system is largely controlled by economic and political elites, both in government and the opposition. In this context, the effect of education reform, especially the end of state-subsidies for private and profit-oriented educational institutions within primary and secondary education, will become apparent in the medium term.
Short- and medium-term challenges:
Center-right government, high share of women
In the general election of November 2017, former President Sebastián Piñera received the highest number of votes in the first round (36.6%) and won the runoff for the presidency (54.6%) for a second term of office, but voter turnout dropped to a historic low – only 46.7% of the entitled population voted in the first ballot. During the new congressional period 2018 – 2022, Chile Vamos, a coalition of four center-right parties that President Piñera leads, will hold 46% of the mandates in the lower chamber and 44% of the mandates in the upper chamber of congress. Due to the impact of gender quotas, the share of women has significantly increased in both chambers. Today, 22.5% of deputies and 26% of senators are women.
Economic, labor
reforms expected
In his electoral campaign and particularly during the runoff, Piñera pursued a moderate course that even considered the extension of fee-free education, a demand closely associated with the political left. Since he lacks an absolute majority in congress and widespread social demands call for a stronger role of the state, some convergence to the center will be needed to get opposition support for political initiatives. A series of economic and labor reforms are expected in order to put Chile on the path to economic growth. Chile Vamos’ proposal includes lowering corporate tax rates. The implementation of the reform proposal on the pension system presented in November 2018 by the current government under President Piñera as well as the relatively high unemployment rate most likely represent the main short-term challenges for the current government.
Constitutional reform process to change
In contrast to the former president, Piñera’s government does not support a major reform of the constitution, but a gradual evolution by means of smaller changes. Therefore, it will not carry forward the participative debate process over the proper institutional mechanism for a substantial constitutional reform initiated by Bachelet.
About the Government Program:

Party Polarization

Polarization not an obstacle to policymaking
Since the return of democracy, ideological and political polarization in Chile has been strongly characterized by the legacy of Augusto Pinochet’s military regime. The original binominal electoral system, which was modified in 2015, strengthened the tendency in parliament to form two ideological blocks. Therefore, party polarization as such has not been a major obstacle for policymaking in the past. In general, the search for consensus rather than conflict has prevailed among political actors since the transition to democracy. Since 2007, party polarization has been slightly lower than the OECD average as the SGI dataset on ideological polarization in party systems highlights.
Shifting alliances might change behavior patterns
This tendency might change in the future as the traditional constellation of political parties and their representation in parliament, especially within the traditional center-left alliance of the Nueva Mayoría changed significantly following the presidential elections of 2017. (Score: 9)
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