Key Challenges

Gap relative to
wealthy countries
Although Chile, an OECD member, has undergone a far-reaching and successful modernization process in recent years, it still faces serious challenges. Internationally, for example, it remains behind other industrialized countries, while domestically it must close the gap between the privileged rich and marginalized poor. The former government under Michelle Bachelet only partially succeeded in implementing its ambitious political, economic and social reform agenda, in part due to a lack of both consensus and financial resources (due to a decline in the key commodity prices that have an outsize effect on the country’s macroeconomic performance). The social and political crisis of October 2019 revealed the urgent need of structural reforms in these areas, and obliged President Sebastián Piñera’s government to modify its original political agenda drastically.
Long-term challenges:
Planning instruments are
underdeveloped; serious
reform needs in
education system
Political and strategic planning are 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. Chile is one of the most centralized OECD countries despite its economic, geographic and ethnic diversity; this fact hampers efficiency. Over the last decade, macroeconomic performance has been positive and stable, and poverty has been significantly reduced, but large socioeconomic disparities remain. These permeate the whole of the social system, but the negative impact is felt particularly within the education, healthcare and pension systems. 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. 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:
Discontent with
political elites
In the general election of November 2017, former President Sebastián Piñera received the highest number of votes in the first round (36.6%) and proved victorious in the runoff for the presidency (54.6%), thus winning a second, non-consecutive term of office. However, voter turnout dropped to a historic low, with only 46.7% of the eligible population voting in the first ballot. This all-time low underscores the generalized discontent among Chileans regarding political elites. Moreover, it undermined institutional channels of mediation in the recent social crisis, as political actors’ legitimacy and representativeness is seriously questioned. By the end of the period under review, poll ratings suggested that only about 10% of the population approved of the government’s leadership.
Social crisis forcing shifts
in policy agenda
In his electoral campaign and particularly during the runoff, Piñera pursued a moderate course in which he even floated the possibility of extending fee-free education, a demand closely associated with the political left. Nevertheless, the social crisis that emerged in October 2019 compelled the government to modify its policy agenda, in some cases drastically. For example, the administration rapidly drafted reform initiatives providing higher pensions for the most vulnerable elderly, additional health insurance for catastrophic events and a state-subsidized minimum income for employees, though these had not been part of its original program. The government has also seemed to show a new openness to a constitutional reform process, one of the core demand of the protests. Without doubt, beyond any policies or constitutional proposals, the government’s primary avowed short-term objective is to gain control over the riots and restore social order in Chile.
About the Government Program:

Presidential interview on the social crisis:

Party Polarization

Polarization not a policymaking obstacle
Since the return of democracy, political polarization in Chile has been strongly characterized by the legacy of Augusto Pinochet’s military regime: opponents vs. supporters, or critics vs. apologists. The initial binominal electoral system, which was modified in 2015, strengthened the tendency to build two different competing ideological alliances or blocks for election campaigns and government or parliamentary work. 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 (and voters) 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. 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: 8)
Back to Top