CAN SHE DUCK THE LAME TAG?: BACHELET AT MIDPOINT

C O N F I D E N T I A L SANTIAGO 000293

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/23/2018
TAGS: ECON ENRG PGOV PINR PREL SOCI CI
SUBJECT: CAN SHE DUCK THE LAME TAG?: BACHELET AT MIDPOINT

Classified By: E/Pol Counselor Juan A. Alsace for reasons 1.4 (b) and ( d).

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Summary
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1. (C) President Michelle Bachelet marked the halfway point in her four year term on March 11, a milestone perhaps become millstone, an anniversary freighted with the weight of unmet expectations. Bachelet swept into office two years ago, Chile's first female president, promising a new style of politics. A cabinet of young, fresh faces, technocrats with ideas, perfectly gender-balanced, would reach out to ""the people."" Drawing on Chile's copper-export fueled budgetary surplus, the Bachelet administration would address the nation's social inequities, focusing especially on education, health care, and pension reform. Expectations were high, as were Bachelet's poll numbers, then hovering in the mid-60's approval range.


2. (C) Two weeks ago, with her ratings in the low 40's (albeit stabilized),a reflective Bachelet, interviewed in a leading daily, said ""It's been a difficult two years, but I don't complain."" She may not, but she certainly doesn't lack for critics who do. A series of corruption allegations in government ministries, three cabinet shuffles in 20 months, and then, most disastrously, the Santiago mass transit reform,"" all gave the opposition fodder for attack. Bachelet also lost her working majority in both houses of Congress, as disgruntled members of her center-left Concertacion governing coalition abandoned her to either take up with the opposition or pursue individual political ambitions, putting at further risk a legislative agenda already short on glittering achievement.


3. (C) Bachelet bears the classic markings of a lame duck: Constitutionally barred from seeking re-election, with weak polls and, thanks to a loss of working majority in Congress, afflicted with a perceived lack of authority (including within her own divided political house) to set Chile's agenda. But it may be premature to write Bachelet or Concertacion off. She retains a personal charisma that appeals to Chileans and the opposition has yet to present a convincing reason why Chileans should change tack. Her last cabinet shuffle brought in several savvy politicos who understand there remains time to show results, before municipal elections later in 2008 and presidential elections in 2009. Moreover, as a confident Bachelet noted to the Secretary earlier this month, she is convinced her agenda of social integration and cohesion"" remains the correct path for Chile, an assessment a majority of Chileans share. For the USG, a successful last two years for Bachelet is in our interest, as we continue to work with her and, especially, Foreign Minister Foxley, to quietly underscore that Chilean regional leadership is important and its successful economic and political model one worth emulating. End summary.

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Bachelet's Morning in Chile...
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4. (SBU) Bachelet, while representing the continuity of four successive Concertacion-led governments (including hers) since the return of democracy, also came to power manifesting something new in Chilean politics. Beyond employing her compelling personal story - a woman, divorced, the daughter of an Air Force general who was tortured at the hands of the Pinochet regime and died in prison - Bachelet ran a campaign and won the presidency promising to attack with vigor the inequalities still plaguing Chilean society, especially in the areas of education, health care, and pension reform. Her tools? Chile's copper-sales generated budgetary surplus, but also a fresh approach to Chile's traditional male-dominated, good ol' boy politics. Catchy slogans such as ""nadie se repite el plato"" (""nobody takes seconds"") promised new blood in government. Bachelet added to the sense of change by naming a cabinet equally balanced between men and women, well-educated and with good technical skills. With poll ratings in the mid-60's as she donned the presidential sash in March 2006, prospects for Bachelet looked bright.

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...Very Quickly Clouds Over
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5. (C) The honeymoon was short. In May 2006 Bachelet was challenged by high school students (with the implicit support of their parents) who took to the streets and demanded immediate improvement in Chile's dismal public school system. Bachelet's tentative response in the face of sometimes violent demonstrations raised concerns about ""a woman"" handling public security - doubts which still plague her and her proposed solution of forming a commission to investigate the issue was seen as a kick-the-can-down-the-road"" bureaucratic exercise. She was further criticized when she left for Washington, in the midst of the crisis, for a (long-scheduled) initial meeting with President Bush.


6. (C) There followed over the next 24 months a series of events that underscored doubts about Bachelet's ability to lead effectively: 1) a slow GOC response to August 2006 flooding in southern Chile 2) the Chiledeportes corruption scandal, featuring allegations that funds meant for government sports programs went to Concertacion political campaigns 3) the ""morning-after"" pill, in which Bachelet's administration backed providing contraceptives to teenage girls without parental consent, a huge contratemps in this still conservative, Catholic society and, 4) the disastrous roll-out in February 2007 of the Santiago mass transit reform (aka ""Transantiago""). As Minister of Public Works Sergio Bitar told the Ambassador March 19, this last was the worst, as it called into question Concertacion's carefully nurtured reputation for efficient execution of public projects.


7. (C) Looking to staunch the hemorrhage in polls questioning her competence, Bachelet tested themes such as that she had ignored her ""intuition"" against launching Transantiago prematurely, and that criticism of her government was akin to femicide."" Neither worked indeed she was criticized for using the fact she is a woman to stiffle criticism when it was convenient, having ""used"" her gender to become president in the first place. Bachelet shuffled her cabinet three times, recognizing belatedly that many of her original choices had weak ties to the four political parties that make up Concertacion, lacked traditional ""ward politics"" ties the street, and were ineffective adminstrators. She brought in people like Bitar, but also Francisco Vidal as government spokesman, Jose Viera-Gallo as the minister charged with shoring up crumbling relations with the legislature and, most famously, Edmundo Perez Yoma as Interior Minister to restore discipline and message within Concertacion. Besides sharing the obvious trait of all being men (putting to rest cabinet gender equality),they all had served before as ministers in previous Concertacion governments (burying Bachelet's promise of ""no seconds""). They are, however, politically savvy operators (para 12).


8. (C) To compound her troubles, Bachelet also suffered significant defections from Concertacion, as powerful figures within the Christian Democratic party (DC - the largest within Concertacion),left that party because of internal dissension, but also disagreement with Bachelet policies. Most prominent was Senator Adolfo Zaldivar, who charged the DC leadership with corruption and then broke with Bachelet over new funding for Transantiago. Taking several other DC congressmen with him, the defections effectively striped Concertacion of its tenuous working majorities in both houses. Zaldivar, joined by other ""independents"" (or renegades in the eyes of Concertacion) such as Senator Fernando Flores (of the Party For Democracy - PPD),entered into negotiations with the opposition center-right Alianza and was named in March 2008 as the new president of the Senate. This position allows Zaldivar, who reportedly dislikes Bachelet intensely, a platform to both control timing of the legislative agenda and criticize the President, making her ability to move forward on her social initiatives all the more difficult.


9. (C) The Bachelet administration's first-half legislative record has not been all that stellar in any event. She did pass two balanced budgets that included increased spending on social programs, as well as education, healthcare and pension reform bills. The reform of pension was a signal achievement - the first update since the system was introduced in 1981 expanded coverage to previously uninsured groups and set a minimum pension guaranteed by the government - and met a major campaign promise. But while the legislation has passed, implementation remains the bugaboo, especially in education. Santiago Archbishop Errazuriz told the Ambassador March 25 that ""a lot of money has been spent on education reform but without results,"" adding that he would not be surprised by a resurgence in protests. Labor Minister Osvaldo Andrade said much the same to us in January vis-a-vis pension reform. And Chileans wonder, with the cost of living rising and the pocketbooks of the poor especially under assault, why in a country boasting of an eight percent GDP budget surplus, their standard of living is seemingly sliding downwards?

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It's Always Darkest...
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10. (SBU) In addition to the woes above, Chile faces an immediate energy crisis, with the real possibility of a long, cold Austral winter requiring rolling brownouts and energy rationing. Economists forecast the energy problem has reduced already tepid-for-Chile economic growth (about four percent) by at least a half percentage point. Some suggest rationing could also lead to social unrest, underscoring Bachelet's perceived weakness on public security, although we have been told by GOC officials that they will ensure supplies to residential areas, with only industry facing real problems. The public security issue has been magnified by a periodic resurgence in Chile's indigenous problem, with extremist elements within the Mapuche (Chile's largest indigenous group) burning vehicles and attacking police stations in southern Chile.


11. (C) Politically, the Concertacion appears vulnerable as Chile heads into municipal elections in late 2008 and then presidential and parliamentary elections in late 2009. Besides the loss of her working majority in Congress, Bachelet faces continued inter- and intra-party fighting within Concertacion. Unlike her predecessor, Bachelet has repeatedly failed to produce consensus in her coalition, a shortcoming which impacts public confidence in her leadership and hinders her ability to implement her agenda. A new corruption scandal alleging poor oversight if not misuse of funds (USD 500 million) by the Education Ministry provides the opposition, already smelling blood, another hook for its allegations that Concertacion, now nearly twenty years in power, is corrupt, and that Chileans, suffering from Concertacion fatigue"" are ready for a change. While Bachelet's poll numbers have recently stabilized around the low-to-mid 40s, the center-right Alianza's most likely standard bearer for president, Sebastian Pinera, leads handily against whomever Concertacion puts up to replace her in the 2009 presidential campaign. Both Pinera, who ran against Bachelet in 2005 and Joaquin Lavin, who narrowly lost to Ricardo Lagos in 1999, told the Ambassador recently Alianza is confident of victory in 2009.

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...Before the Dawn
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12. (C) Despite Bachelet's troubles, our view is that it is premature to pin the lame duck label on her. She remains personally popular, exuding a caring charisma that connects with the average Chilean. Her latest round of cabinet changes - which she says will be her last - put in place seasoned politicos who will use the power of incumbency. Bitar told the Ambassador he has ""a line of mayors and intendentes (regional governors) outside his door waiting for money for projects."" He made it clear that infrastructure development (read: pork and jobs) would happen and would help Concertacion candidates in the run-up to municipal elections. The administration seems to have the Transantiago mess under control the one year anniversary passed in early February without much critical media fanfare. Indeed, service appears to have improved and while the GOC has lost over USD 400 million on the project in the first year of operation, it appears ready to keep pouring money in (""up to USD 1 billion in 2008,"" according to Bitar) in order to quiet criticism.


13. (C) Bachelet herself is confident her government remains on the right path of ""social integration and cohesion,"" she told the Secretary March 14. She (and Concertacion) are also helped by the fact that Alianza has not yet offered a credible reason for change beyond ""change for change's sake."" Lavin frankly admitted as much to the Ambassador, noting that Chileans left and right were in broad agreement on the challenges facing the nation. And, as Lavin also noted, Chileans in the (slight) majority, still lean left. And, finally, Concertacion, despite its stumbles, can still point to am eighteen year record of achievement on economic growth, poverty reduction, and global appreciation of Chilean achievements generally.

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We're Neutral, But...
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14. (C) For the USG, what happens in the remainder of Bachelet's term, and what happens to Concertacion in 2009, is largely an internal matter on which we are neutral. That said, and while there have been disagreements along the way (as with Venezuela and the UNSC vote, and even there Chile eventually saw the light),Bachelet's foreign policy record has been generally solid and in line with USG objectives. The GOC endorsed in 2007 several initiatives of importance to us, including: the Proliferation Security Initiative, the Global Initiative to Combat Nuclear Terrorism, and the Partnership for Democratic Governance. It also took on the chair of the IAEA at a tough time (Iran) and put its name in the race for a seat on the UN Human Rights Council. The GOC came out strongly and publicly in support of the regional FTAs. It pushed ahead with the P4 (a free-trade umbrella agreement which includes New Zealand, Singapore, Brunei, and Chile) and launched the joint PKO with Argentina. Despite growing domestic opposition, the GOC renewed its PKO commitments in Haiti and Bosnia. On Venezuela, Chile came around to share our concerns and adopted positions that put it at odds with Venezuela (e.g., saying ""no way"" to Chavez, Banco del Sur). The Chileans even took on Chavez publicly (e.g., Foxley on TV in the aftermath of the Ibero-American Summit). Bachelet has managed tough relations with Peru, Bolivia and Argentina, undertaking several confidence-building measures in the defense arena with these immediate neighbors.


15. (C) Bachelet told the Secretary she is comfortable with quietly promoting Chilean institutions throughout the region, an idea we fully support. And while she will be mainly focused on domestic issues in the coming two years, she has endorsed the ""positive agenda"" developed by FM Foxley and Secretary Rice. That gives us - and Foxley - broad latitude to deepen cooperation on matters such as Plan Chile-California, the Equal Opportunities Scholarship agreement, and initiatives in energy diversification and innovation. Regardless of the domestic political debate in Chile, we should face no significant obstacles in furthering continued and even increased Chilean regional leadership and in promoting Chile's successful economic and political model.

SIMONS