CHILE'S PRESIDENTIAL RACE: ECONOMIC GROWTH

C O N F I D E N T I A L SANTIAGO 000548

SIPDIS

E.O. 12958: DECL: 06/10/2019
TAGS: ECON PGOV PREL SOCI KIPR CI
SUBJECT: CHILE'S PRESIDENTIAL RACE: ECONOMIC GROWTH
CENTRAL TO PINERA'S VISION

Classified By: Ambassador Paul Simons for reason 1.4 (b).


1. (C) SUMMARY: Opposition presidential candidate and
business leader Sebastian Pinera believes that successive
Concertacion governments have been complacent in managing
Chile's economy, missing opportunities for structural change
and modernization, and creating an extensive and pricey
social safety net that encourages dependency on the state.
Returning Chile to its 1990s era growth rates of 6 to 7% is
central to Pinera's vision for the country, the opposition
candidate told Ambassador and Poloff during a June 9 meeting.
Pinera has a positive view of the U.S., and plans to visit
the U.S. in the coming months. Pinera was pleased to compare
his united and enthusiastic campaign with that of his chief
rival, former President Eduardo Frei, which he described as
"having problems daily." End Summary.

Pinera's Vision: Higher Economic Growth, More Individual
Responsibility
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2. (C) Describing Chile as, at its core, a center-left
country, Pinera nonetheless asserted that the failure of
successive Concertacion governments to manage the economy and
the government well has left an opening for a center-right
politician like himself. Recovering Chile's high economic
growth rates is central to his vision for the country, Pinera
stressed. In the 1990s, Chile was one of the world's fastest
growing economies, expanding at 7.5% per year -- twice as
fast as the global average. From 1998 to 2009, however,
Chile's economy has grown more slowly than the global
average, while neighbors such as Peru have thrived. Chile
had everything going for it in this period -- many free trade
agreements, good access to credit, and high copper prices --
but still experienced a tremendous economic slowdown. Chile
"missed a huge opportunity" for economic growth and to end
poverty during the Frei and Lagos administrations, Pinera
believes. (Comment: The Asian financial crisis was
certainly another critical part of the economic backdrop of
this period, but one that Pinera downplayed. End Comment.)


3. (C) Pinera's criticism extends into President Bachelet's
handling of the Chilean economy. Pinera stated that in 2009,
Chile will have the second lowest economic growth rate in
Latin America, contracting 1% and experiencing 10%
unemployment while its northern neighbor, Peru, grows by 4%.
Bachelet's signature achievement -- expanding Chile's social
safety net -- has been accomplished thanks to record high
copper prices, which allowed Chile to stockpile revenue.
These funds financed the 10% annual growth the national
budget has experienced under Bachelet. Now that the price of
copper has fallen, the country is facing a "huge" deficit
this year, Pinera warned.


4. (C) While the left accuses him of wanting to destroy the
social safety net, Pinera counters that in fact he wants to
perfect it. Chile suffers from unemployment, rising levels
of crime, poor health infrastructure, and a "stagnant"
education system, Pinera charged. Bachelet has given
speeches attacking these problems, but has done little to
solve them. Chileans have become overly dependent on the
state to solve their problems, causing the country to slowly
fall into mediocrity, the presidential candidate asserted.
Pinera proposes structural changes (as yet undefined) which
will promote productivity, innovation, entrepreneurship, and
investment in the economic sphere, and will create incentives
for better teacher performance. His vision is not/not for a
"brutal, radical change," he commented, but rather that Chile
would recover its lost economic leadership and dynamism.

Positive Relations with the U.S. and the World
-------------- -


5. (C) Pinera has a positive impression of the U.S. and is
interested in continuing to strengthen the already positive
relationship. He queried the Ambassador about any problems
in the bilateral relationship, noting that since the Pinochet
era the only significant problem he could recall was the
problem with supposedly tainted grape exports in the 1990s.
The Ambassador saluted the very strong bilateral relationship
and cited intellectual property as one area where Chile could
do more to prepare itself to be competitive with Mexico as
well as other OECD countries. Pinera plans to travel to

Europe in late June and July, and will meet with prominent
conservative leaders like British opposition leader David
Cameron. He also hopes to travel to the U.S. and solicited
ideas for prominent leaders he could meet with, noting that
he has already received invitations to visit several
prominent American universities and think tanks.


6. (C) Pinera wants to increase Chile's engagement with the
world, including finalizing Chile's accession to the OECD.
Chile should embrace intellectual property rights, he said,
which will help Chile's relationship with the U.S. and its
economic strategy.

A Confident Mood: Pinera's Perspective on the Campaigns
-------------- --------------


7. (C) Pinera asserted that his campaign is united,
enthusiastic, and hopeful -- a big contrast to former
president Eduardo Frei's campaign, which he described as
"having problems daily." Enjoying unexpected success at this
early stage, Socialist challenger Marco Enriquez-Ominami is
beginning to organize his campaign team, Pinera noted.


8. (C) Meanwhile, all of Chile's politicos are anxiously
awaiting results from the Centro de Estudios Publicos (CEP)
poll, which is the most reliable of Chile's many public
opinion surveys and is scheduled to be released next week.
Pinera predicts that he will lead the pack with 35% support
to 23% for Frei and 15% for upstart Enriquez-Ominami. Such a
scenario would spell serious trouble for Frei, he said, as
Concertacion supporters would begin dividing their loyalty
between the Concertacion's official candidate, Eduardo Frei,
and its young and charismatic rebel, Socialist
parliamentarian Enriquez-Ominami. (Note: June 10 press
reports indicated that Enriquez-Ominami plans to announce his
departure from the Socialist party on June 12. End Note.)


9. (C) Pinera described his frustration with the lack of
opportunity for substantial policy debate in Chile. The
Chilean press focus on campaign and personal clashes over
substance, and report sensationalist soundbites rather than
giving space for a nuanced conversation about complex issues.
Chile's presidential debate formats typically allow for
little direct interaction between candidates, leading
detractors to describe them as "parallel press conferences."

Comment
--------------


10. (C) As one of Chile's wealthiest individuals and a
Harvard-trained economist, fixing the perceived mistakes of
Concertacion economic policy is Pinera's passion. However,
returning to 6-7% annual growth rates is likely to be
difficult. As a middle-income country, Chile's circumstances
are different from the 1990s, when the country went through a
period of rapid and stable economic development. Although
not as focused on foreign policy as he is on economics,
Pinera's advisors have told us that he sees the U.S. as a
friend and model. Pinera is intensely interested in
traveling to the U.S. and in lining up meetings with leading
politicians, either in the Obama administration or figures in
American center-right political circles. A pragmatic
politician, Pinera knows that photos of him with prominent
American leaders would help him seem substantial and
presidential in Chile. If elected, he would continue to
nurture the strong bilateral relationship. End Comment.
SIMONS