Piñera Shifts Government Plans ahead of Inauguration

Sebastián Piñera’s takeover of the Chilean presidency March 11 signals both continuity and change. Piñera's inauguration will launch the start of the first conservative administration to govern Chile since its return to democracy 20 years ago. Under the ruling Concertación coalition, Chile became an economic superstar, with disciplined fiscal policies steering the country towards low debt, strong savings, and solid GDP growth projected to reach between 5 and 5.5 percent in 2010, even amidst high costs incurred from damage caused by the February 27 earthquake. Piñera promised to continue the policies implemented by his predecessors, also pledging to create one million new jobs and increase economic growth. But in the wake of the earthquake, reconstruction efforts will top the incoming president's agenda. As the president-elect shifts gears to focus on Chile's rebuilding, his first days in office will determine how well-equipped the new administration is to lead in times of crisis.

The 8.8-magnitude earthquake that claimed hundreds of lives and destroyed buildings and infrastructure may “reshape” Piñera’s presidency, forcing his government to concentrate on rebuilding basics—including housing, education, and telecommunications—rather than promoting austerity measures and boosting the private sector. "Whereas the pre-quake agenda included expanding a subsidy program that channels public money to private schools, for instance, the government now needs to ensure that displaced children have a school to attend," writes Paulo Prada in The Wall Street Journal. Analysts say that Chile may have lost as much as $30 billion in damage to infrastructure, and reconstruction efforts could involve raising deficit spending, borrowing abroad, and dipping into the country’s $15 billion offshore sovereign wealth fund, accumulated from copper exports. The earthquake also strips Piñera of a political “honeymoon” period, testing his cabinet of business leaders and technocrats on how to deal with a major disaster, according to Daniel Kerner of Eurasia Group.

But Piñera vowed that, "Our government will not be the government of the earthquake. Our government will be the government of reconstruction." In a bid to ensure the continuity of relief efforts, he asked the director of the National Emergency Office, Carmen Fernández, as well as Concertación governors of the most severely affected regions, to stay in office temporarily after his inauguration. Piñera also announced plans to keep armed forces deployed in the worst hit areas in order to maintain public order, stating that the military has the logistics and tools needed to deal with natural catastrophes. After meeting with Concertación officials in an attempt to promote national unity, Piñera also proposed legislation to expand recovery efforts, including emergency, reconstruction, and donation bills, and a revision of Chile’s natural disasters alert systems. Ena Von Baer, the incoming government spokesperson, said Piñera’s inauguration would be simple and include talks on reconstruction work and solidarity with victims of the earthquake.

Though Chile will suffer a short-term hit from the earthquake, its economy is in a good position to begin recovery in the mid-year. "I actually think Chile will grow quite substantially in 2010 because…clearly reconstruction from the earthquake will have a stimulating effect on the economy and investment will create jobs and will create growth," said AS/COA President and CEO Susan Segal in a PBS Worldfocus interview.

Learn more:

• Remarks by U.S. Secretary of State Hillary Clinton and Chilean President-elect Sebastian Piñera in Santiago, March 2, 2010.
• Worldfocus interview with AS/COA President and CEO Susan Segal on the earthquake in Chile.
• AS/COA analysis on Piñera's victory of the January 17 presidential runoff.
• Piñera’s government website.
• AS/COA analysis on Piñera's cabinet.
• Chilean Ministry of Public Works website.