Interdisciplinary Civic and Political Studies

VOLUME 13 ISSUE 1

The International Journal of

Interdisciplinary Civic and Political Studies _________________________________________________________________________

A Twenty-Five Year Transition to Democracy in Chile Institutional Challenges SOLEDAD SOZA

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A Twenty-Five Year Transition to Democracy in Chile: Institutional Challenges Soledad Soza, 1 Universidad de Chile, Chile Abstract: The following study looks into a twenty-five year political cycle of democracy in Chile (1989–2017). It describes the performance of political and economic institutions in transition times (1989–2013) and their ability to adapt to challenges in post-transition (2014–2017). Challenges involve macro-level constraints (end of the super commodity cycle) and micro-level pressures (protests and mobilizations). This article concludes that moderate, gradualist reforms in twenty-five years continue to be viable options to secure growth and governance, but in light of social demands and economic slowdown, institutions are exhibiting difficulties in reaching new accords. Difficulties relate to the persistent nature of neoliberal conservatism, macroeconomic constraints, and local structural heterogeneity. Keywords: Transition, Post-Transition, Second Generation Reforms, Institutions

Chile Faces “Institutional Challenges” 2

A

ccording to the World Economic Forum (WEF) Global Competitiveness Report 2016–17, 3 Chile leads in Latin America in business climate (thirty-third among 140 nations ranked worldwide and first in Latin America). 4 Chile’s free market policies have enabled the country to engage in international trade and reach a GDP per capita of USD 23,969 in 2016 5 (from USD 5,846 in 1990), making the country the most prosperous in the region. In recent years, Chile has jumped from the status of developing nation to “transitioning to full development” (WEF Global Competitiveness Report 2008–09). 6 In order to hit full development, however, Chile must overcome the “middle-income trap,” 7 requiring a surge of innovation to become a knowledge society. Among the key drivers behind competitiveness are “more and better education (especially higher and technical), greater savings and better investment, better infrastructure, and more innovation and R&D” (Schneider and Doner 2016, 608). Chile faces the challenges of escaping the middle-income trap so patent in countries with limited stock in 1 Corresponding Author: Soledad Soza, Diagonal Paraguay# 257, Faculty of Economics and Business, Universidad de Chile, Santiago, 7591538, Chile. email: [email protected] 2 Schneider and Doner (2016) have coined the term “institutional challenges” to refer to the difficulties that developing countries experience in upgrading their institutions to escape the curse of raw-material dependency. Acemoglu and Robinson (2012) refer to these challenges as “institutional bottlenecks,” i.e. when countries reach the technological frontier and find difficulties to hit sustainable growth. According to Mishra, Flaaen, and Ghani (2013), these new challenges, including social cohesion, should prompt policymakers to promote entrepreneurship and innovation to make the most of the benefits of information networks and skilled labour before the gains from cheap labour and knowledge spill overs are exhausted. 3 The 2016–2017 WEF Country Report for Chile is available at https://www.weforum.org/reports/the-global -competitiveness-report-2016-2017-1. 4 Highlights from the WEF Global Competitiveness Index 2016-2017 for the Latin America and the Caribbean region available at http://reports.weforum.org/global-competitiveness-index-2016-2017/regional-highlights-latin-america-and -the-caribbean/. 5 Data from the Central Bank of Chile is available at http://si3.bcentral.cl/Siete/secure/cuadros/arboles.aspx. 6 Refer to page 132 of the WEF Country Report Chile to observe the status of “Transition 2–3” given to Chile for the first time in the Index. Level 3 corresponds to an “innovation driven” economy. Data available at http://www3.weforum.org /docs/WEF_GlobalCompetitivenessReport_2008-09.pdf. 7 Definition of the middle-income trap: “From a relative perspective, the Latin America and the Caribbean (LAC) region is often cited as the classic case of a MIC trap phenomenon: a review of either the regional aggregate or individual countries shows that income per capita relative to the United States did not progress during the 20th century” (Im and Rosenblatt 2013, 4). The trap can be also defined as a “development stage that characterises countries that are squeezed between low-wage producers and highly skilled and fast-moving innovators…Caught between these two groups, many middle-income countries are without a viable high-growth strategy” (Mishra, Flaaen, and Ghani 2013, 6).

The International Journal of Interdisciplinary Civic and Political Studies Volume 13, Issue 1, 2018, http://thesocialsciences.com © Common Ground Research Networks, Soledad Soza, Some Rights Reserved, (CC BY-NC-ND 4.0). Permissions: [email protected] ISSN: 2327-0071 (Print), ISSN: 2327-2481 (Online) http://doi.org/10.18848/2327-0071/CGP/v13i01/13-32 (Article)


advanced human capital 8 and declining productivity levels 9 (around a 1.2% drop annually in the last fifteen years, with a mining Total Productivity Factor (TPF) drop of 8.8% per year between 2000 and 2014). In the Chilean case, it is vital to understand the obstacles impeding better economic accords to reach enhanced prosperity, especially when Chile and the rest of Latin America are experiencing major challenges shifting to sustainable growth 10 and reducing inequality. 11 In a recent 2017 WEF report on development, 12 inequality was found to be correlated to poor variables in education and low levels of innovation. In order to avoid the curse of raw material dependency, Chile requires an innovative market paired with high levels of R&D and valueadded products. But moving forward is a challenge: Why then—if experts and leaders are aware of the weaknesses of their economies, if they can identify the policies required to improve productivity, and if they recognize the need for broad support and engagement—has it been so difficult to move forward? In probing this question, we find that the existing analyses simply do not explain precisely why there is a trap. (Schneider and Doner 2016, 609) Cross-country research in this area, based on the dominant view that “institutions matter” by Douglas North (1990), focuses on “institutions” 13 as the causality of growth. But the theory still does not explain the vast heterogeneity in institutional outcomes; 14 there is also literature explaining the reverse, i.e. that “growth and human capital accumulation lead to institutional improvement” (Glaeser et al. 2004, 274). Because, ultimately, institutions respond to “collective choices in society” (Acemoglu and Robinson 2005, 390), analysis of the distribution of power in a given society and the resulting political equilibrium outcome is fundamental. As Acemoglu and Robinson (2010, 28) argue: “Solving the problem of development entails understanding what instruments can be used to push a society from a bad to a good political equilibrium.” This times-series article looks into the successes and shortcomings of the political and economic institutions during Chile’s transition to democracy (1989–2013) and provides an analysis of the micro- and macro-level shocks prompting the Chilean government to upgrade institutions in the post-transition era (2014–2017). This article provides a comparative perspective on institutions to understand how stakeholders converge or diverge in policy-making

The OECD report (2007) on skills is available at http://www.oecd.org/education/skills-beyond-school/39313286.pdf. See also the OECD 2014 report on skills at http://www.oecd.org/education/skills-beyond-school/Skills-Beyond-SchoolSynthesis-Report.pdf . Expert analysis was retrieved from http://www.scielo.br/pdf/rbedu/v19n59/11.pdf. The Government initiative to attract foreign talent and academic mobilization is available at http://www.conicyt.cl/pci/files /2017/08/Opportunities-final-2016-final_op.pdf. 9 While copper prices soared, productivity levels declined. In 2016, private entrepreneurs in Chile (CPC) compiled a study of productivity in Chile, which can be retrieved from http://www.productividadchile.cl/diagnostico-general/. This report was featured by BBVA Chile (2016) and is available at https://www.bbva.com/en/chile-terms-productivity/. 10 The UN 2030 Agenda is available at https://sustainabledevelopment.un.org/post2015/transformingourworld. 11 Ian Bremmer’s Top Risks 2017 depicts the volatility in geopolitics, particularly in capitalist societies, where discontent has surged in a populist fashion. Inequality is considered to be a factor driving instability. It is available at https://www.eurasiagroup.net/files/upload/top_risks_2017_report.pdf. 12 The WEF report is available at https://www.weforum.org/agenda/2017/08/theres-an-argument-for-inequality-its-wrong -and-this-is-why/. 13 Acemoglu and Robison (2005) refer to difficulties in explaining growth and cross-country differences; however, these authors emphasize the role of economic institutions as the core root of prosperity, as these institutions establish the incentives to innovate and participate in the economy. 14 “We will also argue that our state of knowledge does not yet enable us to make specific statements about how institutions can be improved (in order to promote further economic growth). Nevertheless, we can use this framework in several ways. One is to illustrate the potential pitfalls of institutional reforms. We can also use the framework to structure our understanding of cases of economic success. Though such an ex-post understanding is not a substitute for policy, it is the first step towards the goal of knowing how to reform institutions” (Acemoglu and Robinson 2008, 2). 8

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SOZA: A TWENTY-FIVE YEAR TRANSITION TO DEMOCRACY IN CHILE

initiatives that break from the status quo and enable the country to walk on avenues of creativity and innovation, impacting the wellbeing of the general population. 15 Since institutions are “humanly devised rules” and exhibit persistence over periods of time (North 1990, 3), four strategic questions need to be answered. What were the endogenous shocks 16 triggering a new set of economic and social state preferences in the 2013 electoral cycle? What were the exogenous shocks prompting the country to seek new pools of investment in line with sustainable growth in 2014–2017? And what are the short- and long-term implications of the new accords reached under the highly controversial Second Generation Reforms in post-transition? This article contends that the 2014–2017 Agenda of Reforms have a potential to tilt the distribution of political power in the short term and a potential to reach economic accords in line with inclusion and sustainability in the long term.

Part I: Transition to Democracy (1989–2013) A Case for Governance: Standard Institutions (GSIs) 17 With the demise of Pinochet’s rule in the 1988 referendum, the centre-left coalition Concertación de Partidos por la Democracia, which included the Partido Demócrata Cristiano (the Christian Democracy Party) and the Socialists inherited not only the neoliberal economic model forged in the Pinochet era, but also the rules of the game contained in the Constitution of 1980. This political cycle included four consecutive Concertación administrations (1990–2009) and one centre-right Alianza por Chile coalition government (2010–2013) led by businessman Sebastián Piñera from the Renovación Nacional conservative party. This twenty-five year political cycle (1989–2017) has displayed considerable stability and growth, particularly during the super commodity cycle (2003–2014). Chile was able to reduce poverty from a staggering 47 percent in 1989 to just 26 percent in 2009 and then to 7.9 percent in 2016 18, and attain its leading position in the region (WEF Country Report 2008–09; 2009–10; 2010–11; 2011–12; 2012–13; 2013–14 19; 2014–15; 2015–2016 20). Despite the subprime crisis of 2008 and the European crisis of 2009, Chile kept its AA ratings for financial resilience (S&Ps Chile Outlook 2014). 21 By 2010, Chile had already entered the OECD exclusive club of countries. Chile’s defensive-offensive economic strategy in foreign policy enabled the country to diversify its raw material export-base from copper to salmon, from

“Even the ‘time-series’ evidence cannot simply be of econometric kind, which cannot capture complexities that characterize the domain of institutions, but should include historical narratives and comparative historical studies” (Chang 2011, 483). 16 Despite tendencies for persistence, there is potential for change, particularly “shocks including changes in technologies and the international environment, that modify the balance of (de facto) political power in society and can lead to major changes in political institutions and therefore in economic institutions and economic growth” (Acemoglu and Robinson 2005, 393). 17 GSIs: Governance-standard Institutions. The term is used by Ha-Joon Chang (2005; 2006) to refer to the orthodox, dominant view on institutions that promote property rights and free market precepts embodied in the IMF and WB. 18 World Bank available at http://www.bancomundial.org/es/country/chile. 19 The World Economic Forum (WEF), in coordination with Universidad Adolfo Ibáñez (UAI) in Chile, provide online access to the Annual WEF Global Competitiveness Report Index featuring Chile’s performance for the period 2008– 2014, available at http://escueladegobierno.uai.cl/wef/reportes/. UAI has been tasked by the WEF to apply and process the WEF-UAI Opinion Survey in Private Companies operating in Chile to be used in the Index. 20 WEF Report for Latin America and the Caribbean 2015–2016, available at http://www3.weforum.org/docs/gcr/2015 -2016/Global_Competitiveness_Report_2015-2016.pdf, continues to place Chile in a top-ranking position in the Latin American Region. Data analysis at http://reports.weforum.org/global-competitiveness-report-2015-2016/country -highlights/. 21 Standard and Poor’s Rating Services reaffirmed its grading for Chile on December 10, 2014: “AA-” long-term foreigncurrency, “AA+” long-term local-currency, and “A-1+” short-term sovereign credit ratings on the Republic of Chile. The outlook on the long-term ratings remains stable. They indicated: “[Our] AA+” transfer and convertibility assessment for Chile is unchanged.” https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/8952424. 15

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timber to fruits, from steel to wine (Fermandois 2011; Ffrench-Davies 2016; Rehren 1995). 22 Chile’s free market policies and a number of Free Trade Agreements (FTAs), 23 together with its distinctive consensus-oriented policy-making, feature the country as an example of a peaceful transition to democracy. The above description fits the goal of stability and economic growth sought by GSIs and in line with the dominant view in the 1990s whereby poor institutions are the root cause of economic problems in developing countries. According to cross-country parametric analysis carried out by Acemoglu and Robinson (2001; 2005; 2010), economic growth has a positive correlation with the quality of institutions. This neo-institutional approach has dominated the field of developmental economics and has encouraged obtaining policy advice from the WB and the IMF to developing countries in order to secure property rights and liberalize the market to reach economic prosperity (Chang 2005; 2006; 2011). 24 Ha-Joon Chang (2005, 1), however, has argued against the excessive dominance of GSIs in policy advice to developing countries: “The discourse suffers from a number of theoretical problems—its neglect of the causality running from development to institutions, its inability to see the impossibility of a free market, and its belief that the freest market and the strongest protection of private property rights are best for economic development.”

The Chilean Model In a paper for a World Bank Growth Commission on Leadership and Governance, Acemoglu and Robinson (2008a, 96) referred to the peaceful transition in Chile as consequence of a “unique combination of socialist and military repression.” First, “the swing to the left” (with Allende and the Unidad Popular revolutionary program to socialism) “and then to the right” (to Pinochet) (96). Both swings “had the effects of first destroying the traditional rural elites, and then destroying those who opposed opening the economy” (96). 25 In sum, the economic boom of Chile is the result of a combination of singular events, which altered the political equilibrium in a way that it reduced distortions and brought in a more efficient resource allocation. 26 In the Pinochet era, local entrepreneurs had to go through a “traumatic adjustment” to adapt to market precepts of free competition and leave the paternalistic state behind as the only mechanism to allocate resources (Rehren 1995, 9). The reduction of the role of the state, the process of opening the economy, the privatization plan, and the implementation of a Labour Plan that limited the power of the unions were all factors that contributed to creating expectations among the local entrepreneurial elite about their potential influence in governmental affairs. The Chilean model was referred to as the “forerunner of neoliberal economic reforms of the so-called Washington Consensus in the 1990s” (Fermandois 2011, 36). Local entrepreneurs, who firmly supported the structural reforms in the dictatorship, were keen in maintaining the 22 DATA available from the Central Bank of Chile at http://si3.bcentral.cl/Boletin/secure/boletin.aspx ?idCanasta=5G8P42047. 23 Since 2004, Chile has signed sixty-four FTAs with countries such as Canada, USA, UE, Japan, South Korea, among others. Chile had pioneered TPP with its TP4 deal, and is an active player in open regionalism in the Pacific Alliance. For more information visit https://www.direcon.gob.cl/en/free-trade-agreements/. 24 Is it institutional design leading to growth? Or is it growth leading to better institutions? The debate has been addressed by Ha-Joon Chang (2005; 2006; 2010) by tackling the gaps in this area of research beyond GSIs—governance-standard institutions such as property rights and free markets accords—and more into the role played by social change. Chang has critically addressed the theory of growth explained by Douglas North (1990) and enhanced by Acemoglu and Robinson (2001; 2005; 2010). 25 Daron Acemoglu and James Robinson (2008a) discuss the Chilean case as one of a few success stories in growth and development. See Chapter 4 “A Few Success Stories” in “The Role of Institutions in Growth and Development” in Growth Commission Workshops for Good Leadership and Governance (Washington, DC: World Bank): 87–97, available at http://siteresources.worldbank.org/EXTPREMNET/Resources/489960-1338997241035/Growth_Commission _Workshops_Leadership_Governance_Acemoglu_Robinson_Paper.pdf. 26 Ibid, 96.

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economic model afloat and convened with the new political class to share leadership of the country (Rehren 1995). SGIs in Chile were not only a result of external forces, but also internally desired: “Many rich people, especially financial capitalists, in developing countries have been very much in favour GSIs” (Chang 2011, 475). In a new dawn, the world opened its financial doors to the new democratically elected leaders and they, in turn, agreed to maintain the neoliberal model under the slogan “continuity and change” (Ffrench-Davies 2016).

“Property Rights” and “Free Market” Institutions Political leaders who had gone through the experience of dictatorship or exile concluded that “uncontrolled popular pressures had been a major factor in the fall of Allende” (Huber, Pribble, and Stephens 2010, 80). They shared the sentiment that the coup d’état of 1973 was the consequence of the polarization of ideas and the loss of political conviviality. In the 1990s, “rather than spearheading progress, the left was accused of clinging to a failed and untenable status quo” (Weyland 2010, 1). In the 1980s, the left had waged reforms to attain modernity and had failed; in the 1990s, the neoliberals redefined the concepts of modernization and applied their reforms. With the fall of the Soviet Union, the left portrayed itself as “defending losers, dying sectors, and shrinking constituencies” (2): This combination of pragmatism and ideology was not only maintained but was reinforced by the centre-left Concertación governments in its two decades of power (….) Chile remains dedicated to a highly pragmatic foreign policy that reflects an ideological framework of adherence to liberal democracy, the international framework of law and free market economies. (Fermandois 2011, 36–37) Chilean foreign policy adopted an economics-centred vision and launched an aggressive Agenda to pursue FTAs with a defensive and offensive strategy, “such as reducing the asymmetric economic dependence on a few markets, influencing power poles, and improving the country’s bilateral relations and international status” (Wehner 2011, 209). This was true with the implementation of the encaje, i.e. the right Chile reserved to use in FTAs 27 with developed countries to collect a tax on capital flight and capital investment to ensure the liquidity of the system, prevent speculative investment, and impede capital flight under adverse economic conditions in the national economy.

The Consensus-oriented Policy Making Principle Opposition parties to Pinochet made efforts to “reduce the margins of uncertainty in the population about the future” (Rehren 1995, 11). Christian Democrat Patricio Aylwin (1990– 1994), the first President of the centre-left Concertación coalition, applied a consensus-principle in policy-making in order to reach broad-based accords to sustain governance and stability. This consensus principle became the Concertación’s biggest asset in political capital during transition times and secured its peaceful reputation. The tension between ideology and pragmatism was always present within the forces of the coalition in terms of “a divide between those who wanted more state intervention and those who were more market-friendly oriented” (Huber, Pribble, and Stephens 2010, 79); however, pragmatism prevailed. This consensus principle was used as early as 1990 to reach accords with the right-wing opposition on the first tax reform moving the economy from a neo-liberal to a market society. 27 “This mechanism is present in the FTAs with Canada (Chile-Canada FTA 1996, Annex G-09.1), Mexico (ChileMexico FTA 1998, Annex 9–10), South Korea (Chile-South Korea FTA 2003, Annex 10.11), the US (Hornbeck 2004, 55; Chile-US FTA, 2003, Annex 10-F, Clause 7) and Japan (Chile-Japan FTA 2007, Annex 8, Clause 1)” (Wehner 2011, 221).

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The Concertación invoked the consensus principle again in 1993 to bring the left-wing activist and president of the workers union, Manuel Bustos, together with leaders of the entrepreneurial world to negotiate a new labour reform. Aylwin’s slogan “Progress within the Realms of the Possible” did not neglect a primary target in early democracy; namely, to restore freedoms of expression and to prosecute those responsible for repression and crimes against humanity during the dictatorship. In 1990, Aylwin summoned the Truth and Reconciliation Panel led by Raúl Rettig, 28 and after nine months of exhaustive investigation, the panel brought a dossier of four volumes detailing 2,115 victims of human violations, 2,279 assassinations, and 165 politically persecuted victims. In 1991, in front of TV cameras, Aylwin asked for forgiveness in the name of the state, while Pinochet, a life senator and still Commander in Chief of the Armed Forces, was preparing his black berets men in open defiance. In 1998, under socialist Ricardo Lagos’s office, the arrest of Pinochet in London sent shock waves to the judiciary over human rights violations. Facing the external pressure of having the dictator indicted over human rights violations outside Chile, the judicial power was prepared to gain back a prestige severely eroded under dictatorship, and found the legal foundations to waive the amnesty law to prosecute the military accused of criminal acts against humanity (Garretón and Garretón 2010, 123).

Norms and Values in Institutions Norms are not free from values (Portes 2010). The proposal to take a piece of an iceberg from the Chilean Antarctica to Expo-Seville in 1992 was a statement to the world expressing the nation’s collective brain and involved three central ideas (Larraín 2001) First, Chile was a different country; second, Chile was a winner; and third, Chile was a modern country (163). The accomplishments of financial gain, economic success, and consumerism became the new central values in Chilean society as a result of technocrats who had implemented structural reforms in accordance with the Chicago School precepts formulated by Milton Friedman (Pelfini 2011; Silva 1991; Undurraga 2015). The conservative elite in Chile was never quite opposed to forms of liberal thinking, but it was Hayek’s version of liberalism that fit best with Catholic conservatives (Larraín 2001). Just as Smith would let the “invisible hand” of economics guide the market and its effects in society, Catholic and neoliberal conservatives in Chile embraced the precepts of market capitalism with dogmatic adherence to its rules: “Some of the free market ideologues in developing countries were even more dogmatic than the ones in rich countries in a manner that the Latin Americans describe as being more Catholic than the Pope” (Chang 2011, 475). This orthodoxy responds to Hayek’s conception of liberalism, in which the Armed Forces stand to protect the market and the rule of law. The “adherence of the elite to the new political project” can also be explained by the fit between the Chicago Boys (Huneeus 1998), in charge of the economic reforms, and the forces of the Gremialismo, the movement set up by Jaime Guzmán, 29 one of Pinochet’s ideologues. These actors aligned over structural reforms as tools to achieve the political objective of transforming the economic foundations of society and building a “protected” democracy against any form of populism (46). In the 1990s, Chile’s relative success enabled its elites to promote a successful narrative of a capitalist democracy. The perception that Chile was outperforming its neighbours became one of the elite’s biggest achievements (Larraín 2001; Véliz 1994). Accordingly, the Chilean character moved from a pessimistic mood to a proud, even arrogant mindset (Tironi 1998). More information on the Panel findings at http://pdh.minjusticia.gob.cl/comisiones/. Jaime Guzmán, founder of right-wing party, Unión Demócrata Independiente, UDI. Guzmán laid the basis for the nonpolitical movement, the Gremialismo, the apolitical view to integrating society and market, with focus on professional unions, intended to organize society and avoid political instrumentation. Appointed by Pinochet to write the 1980 Constitution. Assassinated by the far left terrorists in 1991.

28 29

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The Persistence Nature of GSIs Among the main constraints acting upon the Concertación governments were the appointment of life senators, a Constitutional Tribunal, and the legislative election system known as the binomial system. Binomial law established two-seat districts for elections to Congress, for which each coalition could present two candidates. Accordingly, in terms of representative capacity, its “most significant feature is that the highest polling coalition can only win both seats if it more than doubles the vote total of the second-list; otherwise, each list wins one seat” (Siavelis 2009, 9). Binomial law and the entrenched pattern of post-authoritarian political competition interacted against a background of cultural and socio-economic values inherited from dictatorial times. The interaction between these two variables made it virtually and practically impossible to eradicate the enclaves “unless an exogenous political shock takes place or a reform of the elections system is carried out” (4). Because the Concertación had to rule under the persistent character of these enclaves, the Chilean transition has also been termed as an “incomplete democracy” (Garretón 1994; 2003; Garretón and Garretón 2010), as a “delegated democracy” (O’Donnell 1994), or even as a “supervised democracy” (Vergara Estevez 2007). Owing to authoritarian barriers designed to impede any form of social uproar (Huneeus 1998; Garretón 2003; Garretón and Garretón 2010), stability was guaranteed, but bolder reforms in the neoliberal model were prevented. Despite the reforms made to the 1980 Constitution under socialist Ricardo Lagos (2000– 2006), Binomial Law continued to be an obstacle against reformists due to the high quorum requirement and powerful veto players from the opposition. Gradualism became the only political option to push for progressive reforms given the constitutional constraints guaranteed by the 1980 Constitution. Under the third and fourth administrations of the Concertación, Ricardo Lagos and Michelle Bachelet attempted to implement bolder social reforms, but encountered vetoes from the right-wing parties. 30 Since constraints on human behaviour are the essential consequence of the “rules of the game” (North 1990, 3), one factor explaining their persistence responds to the distribution of power in a given society. Such distribution secures a political equilibrium and the economic gains deriving from such an equilibrium. Those with political power can influence the evolution of political institutions that grant them such power (Acemoglu and Robinson 2010). A second factor is the distribution of resources: “When a particular group is rich relative to others, this will increase de facto political power and enable such group to push for economic and political institutions favourable to its interests, reproducing the initial disparity” (8). According to Solimano (2010), Sunkel and Infante (2009), and Infante (2011), the resulting structural heterogeneity from the Chilean economic model responds to a series of endogenous factors, associated with certain mechanisms, which reinforce inequality and temporal dependence. Corrections were necessary to compensate differentiated initial conditions in terms of gender-gaps, socio-economic variables, the distribution of talents and family income, among others. “Thus, there is a social differentiation for elites in terms of accumulation of assets and social capital (education, credit, contacts, social networks, political influence) in comparison with working classes. Elites accumulate a disproportionate political leverage and greater access to the media, which secure their status quo” (Solimano 2010, 66). Because GSIs dominated policy-making initiatives, macroeconomics fundamentals received primary attention and reforms were implemented in that line to minimize Chilean exposure to market volatility and contagion. Socialist Lagos implemented the “fiscal rule,” which has translated into a panel of experts who estimate “cyclically adjusted government revenues based AUGE health program under Lagos administration, conceived as universal coverage for common illnesses for users of public and private sectors, launched in 2002, negotiations delayed its adoption until 2004, big step on affordable health care, but great internal opposition from Christian Democrats and the ISAPRES private health companies. AUGE permitted a new regulatory body (Huber, Pribble, and Stephens 2010, 88).

30

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on factors such as the potential GDP growth and the medium-term price of copper” (Meyer 2010). The budget is set to achieve a fiscal surplus of 0.5 percent of GDP over the medium term. When revenues exceed the fiscal target, the surplus is saved and invested in sovereign wealth funds, which can be used in times of crisis. During Bachelet’s first administration, aggressive pro-employment, counter-cyclical, and pro-credit measures were implemented. The Central Bank reduced the interest rate of its monetary policy, which after a few months translated into better credit conditions to SMEs and shielded the country against its vulnerable position to international shocks (Ffrench-Davies 2016). Table 1: GDP in Transition vis-á-vis Dictatorship Growth: GDP per capita GINI 1974–1981

1.5

51.9

1982–1989

1.2

56.7

1990–1991

4.0

56.3

1992–1995

7.0

50.9

1996–1998

4.3

53.2

1999–2009

2.2

52.8

1990–2009

3.6

52.8

Data Adapted from Ffrench-Davies 2016

Transition Times Paves the Way for “Institutional Challenges” in Post-Transition GDP growth was 5.0 percent on average during the four Concertación administrations (1990– 2009) “or 5.3% if the 2009 recession is excluded” (Ffrench-Davies 2016, 2). GDP per capita expanded at an annual average of 3.6 percent (1990–2009) compared to 1.6 percent in the 1974– 1989 dictatorship era. As observed in Table 1 above, GINI was around 0.528 in the 1990–2009 period, and it has slightly improved to 0.48 in 2016. This data suggests the consolidation of an unequal distribution of wealth in Chile. Despite solid macroeconomics figures and responsible management of the economy, the Concertación missed “a great opportunity to correct the economic model inherited from Pinochet” (Ffrench-Davies 2016, 2). Risk-aversion in the early Concertación administrations prevented progressive forces to correct the model for fear of having the same uncontrolled hyperinflation seen in Peru, Argentina, and Brazil in their paths to democracy (5). Efforts to implement policies to foster industrial development and innovation, especially to aid SMEs and strengthen the bond between capital market and productive sectors, found strong limitations in the political architecture, which demanded excessive high quorums to pass legislation: “2/3 for significant changes and 3/5 for minor legislative pieces” (Garretón and Garretón 2010, 118). Eaton (2004) points to the decentralization process during dictatorship as an effective tool to avoid a reversal of structural reforms. The permanent nature of reforms that Pinochet’s ideologues were seeking became the authoritarian constraints in democracy designed to lock up any threat to dismantle the economic model (Huneeus 1998; Garretón 2003; Garretón 2013; Garretón and Garretón 2010). What the Pinochet ideologues did not anticipate was that in the wake of economic progress and prosperity, social change and empowered middle classes would challenge the state to reform institutions.

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Part II: Post-Transition (2014–2017) Discontent, Mobilization, and Crisis At the same time that Chile was advancing positions in macroeconomics, PISA and TIMMS examinations proved Chile lagged behind in terms of educational performance. 31 A new generation of young leaders became increasingly vocal in denouncing the skill- and income-gaps and the ruinous loans to pay for university degrees (Espinoza and González 2013; 2014a; 2014b; 2015). Discontent exploded on the streets with protests and mobilizations in 2006 and then again in 2011. Owing to the same rules of the game that allowed for steady growth and responsible macroeconomic management, an increasing number of students began accessing education and eventually took the “cognitive leap” to demand an upgrade of institutions in terms of quality and fairness, even an end to profit in education (Naim 2010). Acemoglu and Robinson (2006b; 2012) 32 refer to this bottom-up pressure for more democratic or inclusive institutions as “de facto” political power. In this sense, provided that non-elite classes can balance the power of the elite, concessions will be credible, repression will be too costly, and the benefits of more democratization will outweigh the costs of democracy for the elite. According to Chang (2011), the causality running from institutions to development has failed to acknowledge that development changes institutions through a number of other channels—increased wealth in the wake of growth creates social demands for higher-quality institutions (transparency issues, accountability, or regulation); wealth also provides the money to finance the upgrading of institutions, as they are costly to implement; and economic development creates agents of change who demand new institutions. 33

The Social Crisis The students’ protests of 2006, and especially of 2011 tested not only the stability gained in transition, but also the capacity of institutions to respond timely and well to social pressures and demands. During the centre-right Alianza por Chile coalition led by former President Piñera (2010–2013), challenges to institutions became increasingly patent. New social actors and student leaders such as Camila Vallejo, Giorgio Jackson, and Gabriel Boric, emerged during the protests as fierce critics of the economic model 34 and enjoyed wide support from society. By 2011, the students’ movement gained momentum and Vallejo was chosen as the most influential person of the year by The Guardian newspaper. 35

For more information, visit the BID, Banco Interamericano del Desarrollo (InterAmerican Development Bank, IADB) at http://www.iadb.org/es/temas/educacion/iniciativa-pisa/inicio,20388.html. See a complete review of the PISA examinations 2012–2015 and the performance of Latin American countries at http://www.iadb.org/es/bases-de -datos/cima/inicio,20590.html. 32 Daron Acemoglu, “Success and Failure of Nations: Institutional Bottlenecks” Zeuthen Lectures, University of Copenhagen, May 21–24, 2012. Available at https://economics.mit.edu/files/7846. 33 “The rising industrial capitalists supported the development of banking against the opposition of landlords, while in the late 19th and the early 20th centuries, the growing power of the working class led to the rise of the welfare state and protective labour laws, against the capitalists, who thought those institutions would bring about the end of civilization as they knew it. Indeed, there is quite a lot of historical evidence to suggest that the causality may be stronger in the latter direction (economic development improving institutions) than in the former (better institutions promoting economic development)” (Chang 2011, 476). 34 The above-mentioned student leaders were later elected members of parliament in November 2013, in what is called the student bloc or “bancada estudiantil.” Vallejo for the PC (Communist Party), Jackson for RD (Revolución Democrática), Boric for IA (Izquierda Autónoma). PC is a party member of the NM coalition, whereas RD and IA belong to the newly-created Frente Amplio coalition calling for radical changes to the economic model. 35 News available at https://www.theguardian.com/world/2011/oct/08/camila-vallejo-latin-america-revolutionary. 31

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Marches and students’ mobilizations point to the shortcomings of a hegemonic economicscentred vision in social policies and the elite’s severe limitations to promote equitable growth. Students defended education as a social right and not a commodity consigned to the forces of the free market. 36 For a vast majority of students, education was not living up to its promise to promote social mobility. Such an educational crisis had also been taking place in major capitalist democracies, such as Canada and Mexico (Meyer 2010). During the 2013 electoral cycle, the centre-left forces promised to favour students’ demands and echoed a new set of “social and economic state preferences” (Moravcsik 2011, 237). In 2013, socialist Michelle Bachelet, who led the UN Women’s Affairs during the protests, was elected President for a second term (2014–2017). In the wake of bitter recrimination from having lost the presidency back in 2009 in the hands of conservative Sebastián Piñera from the centre-right coalition, the Concertación decided to change names to Nueva Mayoría. Thus, Bachelet’s Nueva Mayoría (NM) coalition called for the implementation of Second Generation Reforms to satisfy social demands and hit sustainable growth.

Second Generation Reforms A combination of enclaves and pragmatism during transition (1990–2009) impeded corrections to the economic model, aiding the path to social discontent and weakening governance (FfrenchDavies 2016). Competitiveness declined due to “a hesitating pro-development agenda, with insufficient tax collection, the inability to implement a productive development, especially in regards to SMEs” (2). Garretón (2017, 5) estimates that Bachelet’s Second Generation Reforms were “radical but gradualist in their implementation.” They were foundational, as they intended to shift the privatization focus to education, health, and pensions, and seek the distribution of wealth to pay for free-access to higher education. These also included an electoral reform, an end to the Binomial Law, and even the discussion of a new Constitution: “In the first year (2014), the educational and tax reforms were launched, as they were considered to be emblematic” for the cause of equity and distribution of wealth (12). The reforms were well-received by OECD experts, who had been praising Chile for past policies and now expected authorities to implement reforms to hit “inclusive growth.” 37 The IMF and the World Bank also hailed these announcements. 38 However, they came as a shock to global investors 39 in Chile, in particular with the announcement to scrap the FUT, or Fondo Unico Tributario, a Taxable Profit Fund implemented by Pinochet to attract investment in Chile. The FUT had allowed companies to roll over earnings in an account and avoid paying taxes on the condition that those earnings were reinvested in Chile. Bachelet and her expert team on tax evasion concluded that the time when Chile had needed to lure investment had already moved to Chile needing the richest companies to pay for education of Chile. In general, “the announcement was enough to threaten those powerful

36 “Because a country’s institutions (and culture that underlies them) are given, deliberate choices still matter because there are always elements in a country’s cultural/institutional complex that are pulling in different directions. Depending on how people interpret their ‘tradition’, which aspects of it they choose to highlight, and which interpretation wins in political and ideological battles, a country could evolve in very different directions. More importantly, over the long term, ‘traditions’ are not immutable. Cultures and institutions themselves change, often dramatically” (Chang 2011, 492). 37 More information available at OECD Country Report Chile 2015 at https://www.oecd.org/chile/chile-policy-priorities -for-stronger-and-more-equitable-growth.pdf. 38 More information on Christine Lagarde’s favourable opinion on Bachelet’s Second Generation Reforms at http://www.dw.com/es/fmi-manifiesta-apoyo-a-reformas-en-chile/a-17751965. 39 Read the full article on The Economist at http://www.economist.com/news/americas/21600133-michelle-bachelets -struggle-combine-equity-and-growth-chile-political-futbol. Read the full article on WSJ at https://www.wsj.com /articles/SB10001424052702303678404579535830371293094.

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economic interest groups generated under Pinochet rule and consolidated in democracy” (Garretón 2017, 7).

The Structural Crisis The mobilization of students in 2006 and 2011 drew the attention of many analysts and scholars, puzzled over the discontent of Chileans given their successful story of political transition. A closer look at micro-level permitted to obtain the data accounting for social discontent in a successful transition to democracy. Ben Ross Schneider (2013; 2014) argues that Latin America exhibits a hierarchical variety of capitalism, which is different from the capitalist variety in the US, Western Europe, or in East Asia countries. The hierarchical variety in Chile exhibits four elements: a significant participation of multinational corporations in local production; local business in the hands of a few family business, which control a great number of economic sectors; atomized labour relations; and the corollary of low-skilled workers (and a low-paid job market). Micro-level indicators reveal that inequality has a correlate with structural heterogeneity due to gaps between large enterprises and local SMEs, and the resulting gaps between high-skilled workers and lowskilled workers (Schneider 2013; Schneider 2014; Ffrench-Davies 2016; Solimano 2010; Sunkel and Infante 2009). Table 2: Varieties of Capitalism Liberal Coordinated Network Hierarchical (LME) (CME) (NME) (HME) Employment Short-term Long-term, Life-time Short-term, Relations Market Negotiated Employment Market Industrial Few Encompassing Company Few Unions Relations Unions Unions Unions Labour No Yes Yes No Management Committees Skills General Sector-Specific Firm-Specific Low Adapted from Schneider 2014

Table 3: Description of Hierarchical Capitalism LME CME NME HME Allocative Markets Negotiation Trust Hierarchy Principle Characteristic Spot Institutionalized Reiterated Order or Interaction among Exchange Meeting Exchange Directive Stakeholders Length of Short Long Long Variable Relationships Representative USA GERMANY JAPAN CHILE Case Adapted from Schneider 2014

According to Ben Ross Schneider, 40 the dependency path on raw-material exports has reinforced the low-skilled and low-paid job market, as the incentives for innovation were very small, especially during the commodity boom. With the end of the boom, solving the issue of low 40

Watch Schneider’s conference at UC Berkeley at http://clas.berkeley.edu/research/labor-low-skill-trap.

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productivity and poorly educational variables requires a political consensus across coalitions to invest in education, especially public education, and improve its quality (WEF Country Reports of 2015; 2014; 2013; 2012). In order to replicate the case of Finland, which had heavily relied on resources coming from forestry exports, innovation was achieved through high public investment in education and high private investment in R&D. However, in Chile, the private sector does not contribute to finance R&D, 41 and there is a high level of privatization in the educational system. Educational performance, according to Schneider and Doner (2016) continues to lag in all Latin American countries, not just Chile. Poor PISA scores in Latin American countries indicate that a forty-five point difference is equivalent to about one year of education; fifteen-year-old students in middle-income countries are two years behind the OECD countries and more than three years behind high-income countries in East Asia. The issue of human capital accumulation translates into “the enormous challenge to overcoming the middle-income trap” (Schneider and Doner 2016, 609). Mishra, Flaaen, and Ghani (2013, 6) refer to Malaysia’s successful policies tackling the country’s skills crisis as a key factor in escaping the middle-income trap: “Highly skilled workers and professionals are an indispensable ingredient of high, valued-added, modern services and manufacturing.”

Elite Attrition and Corruption Cases By 2015, a probe into tax evasion by the Servicio de Impuestos Internos (SII)—the National Revenues Service—uncovered a trail of phony invoices used for tax evasion by national holding Penta that were illegally used to finance right-wing UDI 42 political campaigns. Pentagate was only the tip of the iceberg. The judiciary followed the footprints of Pentagate and uncovered the same modus operandi in Soquimich (SQM)—a mining company in the hands of Pinochet’s sonin-law, Ponce Lerou—which had been financing the political spectrum from the right to leftwing including prominent figures from the Concertación de Partidos por la Democracia (Nueva Mayoría). The Judiciary continued to work autonomous from the state and within months of exhaustive investigation, the National Prosecutor collected overwhelming evidence to compel SII to sue Penta and SQM. UDI’s president, Jovino Novoa, was later prosecuted on tax fraud charges. Penta’s high profile owners are currently under house arrest awaiting trial. The SQM case has involved large sums of money illegally financing MP’s campaigns. Their testimony was part of legal proceedings in 2017. In this wave of political scandals, a third high profile case piled up. The Judiciary found evidence to prosecute Caval, a company in the hands of President Michele Bachelet’s daughterin-law and son, for trafficking influence to get a loan allegedly used in a lucrative business operation to buy and sell land for residential use. Caval became a source of permanent damage to Bachelet’s credibility, which translated into a low approval of her government—around 25 percent, according to polls in December 2015 43. According to Garretón (2017, 12): “This event and the media repercussions, independently of the fact that Bachelet was not involved, affected her leadership and produced divisions in the coalition, which contributed to increase the animosity and heated debate over the reforms underway.” Scandals opened up a window of opportunity to scrap the Binomial Law. By April 2015, Bachelet succeeded in putting an end to the most persistent enclave of the Pinochet era. 44 The reform included more female representation in Congress (40%) and easing the barriers on Chile allocates 0.4 percent of its GDP to R&D whereas South Korea invests 4.49 percent on research. Information available from the Ministry of Economy, 2015 at http://www.economia.gob.cl/wp-content/uploads/2015/01 /Presentaci%C3%B3n-principales-resultados-Cuarta-Encuesta-I+D.pdf. 42 UDI: Unión Demócrata Independiente, the right-wing party formed under the precepts of the Gremialismo, funded by Jaime Guzmán, who was one of the main ideologue during the Pinochet era. 43 See the data from Adimark pollster available at http://www.adimark.cl/es/estudios/dinamica.asp?id=324. 44 More information available at http://www.gob.cl/2015/04/27/fin-al-binominal-conoce-el-nuevo-sistema-electoral/. 41

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independent actors to establish political parties. The number of seats increased for regional representation, with a more inclusive, proportional system to narrow the distance between social actors and party formation. On April 12, 2016, Bachelet announced a new bill 45 with “exemplary sanctions” for those MPs in breach of the new regulatory framework, penalizing corruption. The law comprised two pieces of legislation to ensure transparency, with high standards on party elections, campaign financing, new party-formation, and a limit to re-election. The bill granted the Servicio Electoral (SERVEL) 46 full auditing and regulations powers to enforce the law. Private campaign funding was strictly forbidden; breaking the law would entail losing the seat permanently. Expulsion from political parties is binding on evidence of malpractice or in breach of ethical standards independently of the legal proceedings. According to Garretón (2017, 13): “This was the end of private funding to campaigns and the beginning of legislation to strengthen SERVEL, together with a series of probity measures to curtail electoral spending.”

Pragmatism and Macroeconomics Constraints: The Turn to Moderation Overall, 2014 and 2015 displayed a high level of confrontation and polarized views on Bachelet’s reforms, which characterized much of the debate. According to Greif and Kingston (2011, 16), there is no guarantee in the selection of efficient rules and “in many cases, those with political power may try to select rules to generate distributional benefits for themselves; that is, to maximize their welfare rather than that of the society as a whole.” Difficulties within the NM coalition to reach a consensus on bills and the technical aspects of the reforms became increasingly patent. Opposition came from the coalition itself, such as sectors of the Christian Democracy calling for more deliberation to improve the technical aspects of the bills. By the end of 2015, Bachelet’s NM government announced the end of the super commodity cycle. Record low copper prices, decreased levels of FDI, and a modest GDP (around 2% in 2017 47) were patent signs of the economic slowdown. The alarm came from the centre-right and local entrepreneurs who raised their concerns over signs of stagnation. There were two choices for NM Bachelet—either maintain the path of progress seen in Chile for the last twenty-five years, or “go south” by falling into the trap of populist decisions. The former materialized in the appointment of Harvard-educated Rodrigo Valdés as the new Finance Minister, known by his good relations with the entrepreneurial world. Local and international investors hailed Bachelet’s new Cabinet appointment. Bachelet’s new slogan, “pragmatism without renouncement,” signaled moderation in policy-making. In 2016, President Michelle Bachelet launched a Pro-Growth, Pro-Investment, and Productivity Agenda. While new Finance Minister Valdés announced the twenty-two measures 48 to trigger investment, Bachelet toured the US 49 to reassure global investors such as Goldman Sachs, Oracle, Equifax, AES, and Principal Financial Group that the rule of law still reigned in Chile. At the same time, Bachelet’s Presidential Secretary, Eyzaguirre, 50 met with local entrepreneurs to announce the bulk of reforms was in the finalization stage.

45 More information available at http://www.gob.cl/2015/04/28/presidenta-bachelet-en-cadena-nacional-no-habra -desarrollo-democracia-paz-social-si-no-reconstruimos-la-confianza-en-nuestra-vida-publica/. 46 See the data and the scope of the new law from the Servicio Electoral website at https://www.servel.cl/consejo -directivo-del-servicio-electoral/. 47 Information available at http://www.imf.org/external/pubs/ft/scr/2016/cr16376.pdf. 48 Information available at https://www.df.cl/noticias/economia-y-politica/macro/gobierno-anuncia-paquete-de-22 -medidas-para-apuntalar-el-crecimiento-de/2016-03-30/102701.html. 49 More information at http://www.latercera.com/noticia/la-intensa-agenda-de-bachelet-hoy-en-estados-unidos-bilateral -con-obama-y-firma-de-acuerdos/. 50 Information available at http://www.gob.cl/ministro-eyzaguirre-icare-la-obra-gruesa-del-gobierno-esta-terminada -ahora-tiempo-consolidar/.

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Nonetheless, Bachelet’s reformist Agenda kept her promise to move Chile away from its “addiction to copper.” 51 In 2016, Bachelet declared the lithium deposits (not in the hands of SQM) strategic resources and initiated a tender process. On June 1, 2017, at the State of the Nation Address, Bachelet announced she had laid out the foundations 52 for sustainable growth: a shift in renewable energies, placing Chile as a regional leader in NCRE, and lithium exploitation in the north of country, for the first time tied to value-added investment. By August 11, 2017, a major announcement was made to reform the pensions system 53 due to mobilizations and protests. By September 2017, the controversial decision to reject a copper investment project near the Humboldt natural reserve 54 on grounds of sustainable growth and protection of the ecosystem provoked frustration in the economic elite. The resignation of the whole Economic Team over this issue points to the country’s heavy dependency on copper exploitation for state revenues. Reforms in Chile during the second term of President Michelle Bachelet have been gradualist given the persistence of fiscal rule and macroeconomics constraints 55. The political capital of a consensus-oriented policy-making has prevailed and has enabled Chilean Parliament to approve a highly controversial tax reform and a difficult-to-pull education reform in the name of equity and fairness. As result of tradeoffs to reach broad-based accords, Parliament approved a highly controversial tax reform to fund gratuity for vulnerable students. 56 Legislation allocated resources to fund university fees for 50 percent of students from the poorest quintiles of society in 2017 and 60 percent in 2018.

Conclusions Difficulties in reaching an overarching consensus on how to steer the country into an innovative, sustainable, and inclusive matrix derive from the persistence of GSIs designed in the Pinochet era, which aimed at protecting the neoliberal economic model and the structural reforms carried out during the dictatorship. Tacit to this line of argument is the fact that the needs to reach better accords on inclusion, innovation, and advanced human capital were not politically pressing factors until the students’ mobilizations of 2011. The article contends that in post-transition, Bachelet’s Second Generation Reforms have been shaped by:

Bachelet’s inteview in Bloomberg available at https://www.bloomberg.com/latam/blog/chile-esta-dejando-atras-su -dependencia-del-cobre-dice-bachelet/. Also available at https://www.bloomberg.com/news/articles/2017-07-26/chile-hitches-ride-on-china-coattails-as-copper -addiction-eases. 52 “By March 2016, President Bachelet declared the lithium resources in the north of Chile as strategic, with a view to investment, tied to value-added exploitation, as monitored by Country Risk Chile. During 2016, Invest Chile, the new pro-investment Agency, embarked on promoting Chile and finding partners in renewable energy, solar-powered energy in the north and lithium exploitation intended to reach value-added products as reported in August 2016” (Soza 2017) http://www.country-risk-chile.com/index.php/blog/21-chile-2017-risks-and-opportunities/78-the-silk-road-3. 53 Information retrieved from http://www.country-risk-chile.com/index.php/blog/21-chile-2017-risks-and-opportunities /86-greenlight-to-a-reform-on-pensions-in-chile. 54 Information available at http://www.mining.com/chile-rejects-divisive-2-5-billion-dominga-copper-iron-project/. 55 New accords include the creation of the new Environmental Agency with fully-fledged ministerial powers, an end to profit in education, end to segregation enrolment process at schools, demunicipalization of schools, among other institutional accords, new transparency and probity laws, new pools of investment (lithium tied up to value-added investment) and a new tax reform, available at http://www.gob.cl/ and at https://www.bloomberg.com/news /articles/2017-10-02/chile-s-bachelet-looks-to-ensure-her-legacy-even-as-debt-rises. 56 50 percent gratuity for poor students accessing higher education already in 2017 and 60 percent gratuity in 2018 as announced by Bachelet in the National Budget address, October 2017. New accords include the creation of the new Environmental Agency with fully-fledged ministerial powers, an end to profit in education, end to segregation enrolment process at schools, new transparency and probity laws, new pools of investment (lithium tied to value-added investment) and a new tax reform among other reforms, available at http://www.gob.cl/ and at https://www.bloomberg.com/news /articles/2017-10-02/chile-s-bachelet-looks-to-ensure-her-legacy-even-as-debt-rises. 51

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a) Endogenous shocks: mobilizations shaping the Governmental Agenda and elite attrition enabling the end of the Binomial Law, with a potential to tilt the political equilibrium in the shorter term. b) Exogenous shocks: the end of super cycle prompted initiatives for NCRE, such as solar energy in the north and lithium exploitation tied to value-added investment, providing incentives to overcome the dependency path on raw materials that neglects the Global Value Chain (GVC) and R&D. This combination of shocks at micro and macro levels enabled a window of opportunity to pass legislation on transparency and probity laws, strive for sustainable and inclusive growth, and pass an electoral reform to attain enhanced political representation. Indeed, as a result of the electoral reform, centre-right and centre-left parties will have to reach accords with a third political actor in Parliament as of 2018: the newly-formed Frente Amplio coalition calling to deepen the reforms and with an anti-establishment component. Broad coalitions and talented solutions will be needed to pass future legislation. Institutional change has taken place against economic slowdown and mobilizations. These have become pressing “institutional challenges” insofar as the Chilean Government has had to balance macroeconomic fundamentals (GSIs) with social demands. However, accords have been reached despite the highly charged ideological environment, proving that the political capital of a consensus-oriented policy-making is still dominant and resilient in Chilean politics.

Acknowledgement Special gratitude to Bill Cope, Director, and Hannah Werner, editor, and the whole revising team at the International Journal of Interdisciplinary Civic and Political Studies for their valuable feedback and support.

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ABOUT THE AUTHOR Soledad Soza, MSc: Teaching Assistant, Faculty of Economics and Business, Universidad de Chile, Santiago, Chile

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The International Journal of Interdisciplinary Civic and Political Studies is one of seven thematically focused journals that support the Interdisciplinary Social Sciences Research Network. The Research Network is comprised of a journal collection, book imprint, conference, and online community. The journal presents studies that exemplify the disciplinary and interdisciplinary practices of the social sciences. As well as articles of a traditional scholarly type, this journal invites case studies that take the form of presentations of practice—including documentation of socially engaged practices and exegeses analyzing the effects of those practices. The International Journal of Interdisciplinary Civic and Political Studies is a peer-reviewed, scholarly journal.

ISSN 2327-0071