Looking towards the future

Ricardo Lagos, who is seeking the presidency of Chile this year, sets the way forward for his country

Issue 1, Volume 48, 1999

In recent times, Chile has been in the eyes of the world because of its past history and the unfinished tasks of our democratic transition. I wish to focus here, however, on a longer term perspective. Indeed, Chile must confront the challenge of an incomplete democratisation and then move on to the future.

As we approach the year 2000, Chile will initiate a new stage in its history. In fact, Chile is now closer to its bicentennial in 2010 than to the breakdown of the democratic regime that took place with the coup d'état that overthrew President Salvador Allende in 1973. Hence, without forgetting our traumatic past, the Chilean people now want answers about the future.

There are many tasks ahead: to consolidate a solid and stable democracy; to advance towards social equity; to modernise our public administration; to provide better access to quality education and health; to continue economic growth while respecting our environment; and, to provide more and better jobs.

But imagining the future is inevitably based on what we have achieved as a government coalition, the Concertación por la Democracia, during the last ten years.

In economic terms, inflation was reduced from about 29 per cent in 1990 to about 5 per cent last year. In the past decade, Chile has exhibited rates of growth of about 7 per cent, meaning that in 13 years Chile has doubled its gross domestic product (GDP). In the past it took us 36 years to double it. The domestic savings rate in our country has increased, while unemployment was, until recently, on a downturn and is still relatively low.

In the political arena, during the last decade Chile has regained its freedoms, enjoys political pluralism and there is no longer torture or fear of disappearance. There is a vigorous free press and a Congress that fully exercises its prerogatives.

In the social field, there has also been progress. The decrease in poverty is evident (although income distribution remains highly unequal); educational reform focusing on equity and quality has also improved.

In other words, we have progressed much in the last ten years. Macroeconomic stability and growth are now almost a given. Today we can speak confidently about the future precisely because we have our house in order.

But, there is also a widespread perception in Chile that growth has not benefited all. Many feel, rightly so, that the fruits of progress have not entered their homes. Inequality in income distribution is as acute now as in the 70s. There is a sense of legitimate frustration, but also a sense of hope.

Because we have our house in order, Chileans need, therefore, to advance more ambitiously towards social equity.

True, we must persevere along the road of low inflation, sustained growth, higher rates of domestic savings, and increasingly higher rates of productivity. This is the foundation for social change. Higher salaries and better jobs will come only if we persevere with the macroeconomic stability already achieved. There may be some fine tuning required to achieve a better combination of interest rates and real exchange rates, for example, but the broad direction of macroeconomic growth and stability is clearly established.

Our challenge is how to introduce greater degrees of solidarity on the basis of a sound economic system.

I believe that the future of Chile depends to a large degree on deeper educational reform. We must discriminate in favour of those who have less in their access to education and training; we have to link education to the productive sectors. When it comes to education or health, Chileans cannot be viewed as mere consumers, but as citizens. Consumers in a free market society have unequal buying power, while citizens inherently have the same rights. Hence, the way to avoid an unfair or unequal educational or health system is to use the citizen approach rather than to leave it up to the market.

We need to improve the framework of labour relations, introduce unemployment insurance and reassess and amplify the health care system.

On another dimension, we must make a technical, financial, and even philosophical, effort to improve the quality of life in our cities, affected by pollution, traffic congestion; we have to recuperate our neighbourhoods, our parks, and our streets, making them safer and friendlier for the people. Economic growth will have to be compatible with the protection of our environment, with perfecting the preservation of our native forests, our marine resources, as well as controlling toxic residues.

For such tasks, we need an active and dynamic State. We will need as large a State as is socially-necessary. Free markets are not perfect and the State must be present where needed to create equal access, to stimulate cultural development and to redress existing inequalities. We must put the State at the service of the people, of the Chilean family. To the family that wants concrete solutions, that does not want to live with the fear of unemployment, the fear of ignorance, the fear of sickness.

But, we do not want a heavy, bureaucratic State. Modernisation of the public apparatuses is a must. Transparency, efficiency, and participation are only some of the criteria to face the still pending modernisation of the State.

The Pinochet crisis has also shown the weaknesses of our democratic transition. At a moment when in my country there is an intense debate on our endangered `jurisdictional sovereignty', some do not want to speak about our incomplete popular sovereignty. That is, about the continuation of authoritarian enclaves, like the non-elected `institutional' senators, appointed through mechanisms that favour the right wing, or the National Security Council, where the military exercises influence equivalent to that of civilian authorities.

Chile is a different and more complex case than that of countries like Brazil or Spain, which actually recuperated full democracy and even held constituent assemblies. In Brazil, return to democracy meant the immediate abolition of non-elected or `bionic' senators; in Chile, after almost a decade of democratic transition, they still exist. In short, we need to regain full popular sovereignty through major constitutional reforms regarding, for example, the electoral system, non-elected senators, the composition and attributions of the National Security Council and the constitutional tribunal.

The task of completing our transition will remain undone unless we also establish satisfactorily the truth about the disappeared political prisoners and make those found responsible respond before the courts. This is an open wound that will not heal until we confront the problem and find an acceptable solution.

In December 1999 Chile will choose its President for the beginning of the new century and at the beginning of June the Concertación honoured me with the nomination as its presidential candidate after open primaries which were held on 30 May.

The important point to emphasise here is that Christian Democrats, socialists, Party for Democracy members, and radicals are not adversaries. All together, we are partners in the construction of the future. The Concertación is the widest, most successful and most stable political coalition that Chile has seen in many decades.

The Concertación was fundamental in the struggle to recuperate democracy, and it will continue to be essential in the coming years to achieve full democracy, continued economic growth and social progress.

It is now commonplace to state that globalisation imposes constraints on national decision-making. Indeed, we are limited by the fact that we live in an ever more interdependent world, that, in addition, left behind the cold war.

In such a world, what happened in Asia is now affecting us all, and Brazil's troubles are adding difficulties to our economic performance.

Although there is some uncertainty regarding emerging markets, Chile maintains sound macroeconomic fundamentals. Despite the decline caused by external shocks on Chile's rate of growth during the last trimester of 1998 and the first quarter of this year, Chile will begin to slowly recuperate its dynamism towards the second semester.

The rate of growth will be somewhat below 3 per cent. Trade exposure to East Asia has caused concern as recession in Japan and South Korea has affected two key export markets; but this is not a serious obstacle. The fall of commodity prices is a more substantial issue, as the price of copper has dropped; but it will rebound. Chilean exports in 1999 are likely to rise about 5 per cent, due to both moderate price increases and the physical expansion of volumes. The current account deficit will decline to about 4.6 per cent of GDP (as compared to 6.2 per cent in 1998).

I believe that foreign investors will know that it is worth assigning a premium to the solid economic performance of our country, despite a temporary slowdown.

In a globalised world we will have to export more and better, emphasising the generation of good quality jobs, the contribution of exports to domestic growth and productive investment. Our financial opening should not be without some controls and will have to take into account domestic stability, as well as entrepreneurial, social and productive development. In a similar sense, we must also advance further in the modernisation of production, export capacity and labour in our economy, to make the country less vulnerable to the downswings of the globalised economy.

Despite globalisation, only 15 per cent of the world GDP travels across borders, and half of that 15 per cent is exchanged between neighbouring countries. This means that geography still counts for a great deal. For a relatively small country like Chile, whose value added by exports represents around 35 per cent of GDP, this is quite important. It means that we must continue on the track of regional integration with our neighbours in the Mercosur and the hemisphere, making compatible a decisive commitment to the region with Chile's feature as a global trader. Our voice will be felt louder if it is in tune with our natural partners in the region.

To summarise, I am optimistic about the future of Chile. We will certainly face difficulties: some inherited from our own traumatic past, others derived from external conditions. But, I believe that we have a solid economy, valuable human resources and a citizenry that wants to contribute to build a more democratic, egalitarian and prosperous society. This is our challenge for the new millennium.



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