In a Positive Economy, Piñera Sees Rising Popularity

Chilean President Sebastián Piñera saw his public approval ratings rise to 36 percent in a July Adimark poll—the highest level in 15 months. This follows a series of positive results linked to the government’s economic management. Chile’s economy grew an unexpectedly high 5.5 percent in the most recent financial quarter, unemployment fell to a healthy 6.6 percent, and the government released figures showing poverty dropped to 14.4 percent in 2011. Notwithstanding, the president faces challenges as inequality remains stubbornly high and public disapproval of the governing coalition remains steadfast at 59 percent. Furthermore, the ongoing economic slowdown in Chile’s main trading partners and, in turn, in the price of copper, are likely clouds on the horizon.

The Central Bank of Chile released figures August 20 showing the economy grew 5.5 percent in the second quarter of 2012 when compared to the same period last year. A report released by the Bank said all major economic activity had expanded, but highlighted the service industry, retail sales, construction, and utilities as standouts.

This strong show of internal demand, up 2.6 points on the previous quarter to 7.1 percent, can be attributed to domestic confidence in the labor market. In an interview for El Mercurio, Finance Minister Felipe Larraín stated that Chileans are consuming more because “they see a labor market where you’re likely to keep your job or find a job, and salaries that have grown 6 percent in 12 months.” On August 18, Piñera announced his administration had created 700,000 new jobs over two years, with more than half going to women.

However, while analysts believe these figures represent a country operating at full employment, the lucrative mining sector is worried a strained labor supply will restrict growth. Mining is one of the main drivers of the Chilean economy, accounting for approximately 15 percent of GDP and just over half of all exports. With that in mind, the Ministry of Labor announced a series of programs aimed at increasing technical and industrial worker capacity, with a focus on increasing female participation in the mining sector. Chile’s highly globalized market could also take a hit from ongoing economic slowdown in the world’s major economies. Copper prices fell 12 percent in the last four months due to slowing demand in China, Europe, and the United States. For every cent that copper goes down in price, Chile loses $120 million.

The government is facing a tougher market at home. Though Chileans aren’t worried about the management of their economy, the government remains unpopular because of a perceived lack of social opportunities emerging from the financial stability. Intractable educational protests persist as the government refuses to concede to the students’ demands, which it says are financially unrealistic. And the students, in turn, refuse to compromise on the government’s counter proposal. Furthermore, while Chile is increasingly more middle class, income distribution remains the most unequal in the OECD.

Arturo Fontaine, director of the Centre for Public Studies, says Piñera “has convinced Chileans that he's very intelligent, but he hasn't convinced them he has a heart.” It is, however, worth noting that the opposition Concertación party saw its approval ratings remain steadily low at 19 percent in the same July poll. This could indicate that perhaps Chileans are more disapproving of the political status quo in general rather than the government holding the reins.

Learn more:

• AS/COA holds is annual Latin American Cities conference in Santiago on August 30. Access information about the event, the agenda, and the conference blog at www.as-coa.org/Chile2012. Follow the conference on Twitter: @ascoa, #ascoa_cl
• Access the Chilean Mining Commission’s website.
• Read the Chilean Central Bank’s quarterly economic report.
• Access Adimark’s monthly government polls.