Bachelet Vows Free Education After Chile Landslide Victory

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Michelle Bachelet, Chile's president-elect, celebrates after getting the results of the run-off presidential election in Santiago on Dec. 15, 2013. Close

Michelle Bachelet, Chile's president-elect, celebrates after getting the results of the... Read More

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Photographer: Claudio Cruz/AFP/Getty Images

Michelle Bachelet, Chile's president-elect, celebrates after getting the results of the run-off presidential election in Santiago on Dec. 15, 2013.

President-elect Michelle Bachelet vowed to reduce inequality in Chile by providing free education for all after winning the biggest majority in at least 40 years in yesterday’s vote.

Bachelet will take office March 11 after obtaining 62 percent of the ballots, compared with 38 percent for ruling-alliance candidate Evelyn Matthei, the electoral service said. The 62-year-old who was president from 2006 to 2010 is the first to win a second term since the return to democracy in 1990. Consecutive terms are not allowed in Chile.

Bachelet promised $15.1 billion in extra spending after three years of protests over the quality of schooling pushed the popularity of President Sebastian Pinera to a record low. While Chile is the wealthiest country in Latin America, students said the cost of education was fueling the highest income inequality in the 34-nation Organization for Economic Cooperation and Development.

“Through the prism of education we have been able to dream of a fairer Chile,” Bachelet said in a speech to supporters last night. “Profit cannot be the motor of education, because education is not a commodity. Dreams are not sold on the market.”

The peso rose 0.2% to 529 per U.S. dollar at 10 a.m. Santiago time. The yield on Chile’s 10-year sovereign bonds rose 2 basis points, or 0.02 percentage point, to 5.17 percent.

Photographer: Martin Bernetti/AFP via Getty Images

A woman places stickers on ballot boxes at a polling station in Santiago, on December 14, 2013. Close

A woman places stickers on ballot boxes at a polling station in Santiago, on December 14, 2013.

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Photographer: Martin Bernetti/AFP via Getty Images

A woman places stickers on ballot boxes at a polling station in Santiago, on December 14, 2013.

Majority

Bachelet’s coalition won a majority in both chambers of Congress last month with a big enough margin to push through her proposal of increasing corporate taxes to fund social spending.

“We have the majorities in parliament and the regions and we have the political, social and economic conditions,” Bachelet said. “Those who want change are a broad majority and it’s time to put them into action.”

She will come to power as policy makers at the central bank forecast slower growth for the second straight year in 2013. The Imacec, a proxy for gross domestic product published monthly by the central bank, expanded 2.8 percent in October from the year earlier, the slowest pace in more than two years.

While the Finance Ministry is forecasting expansion of 4.9 percent for next year, former central bank presidents Vittorio Corbo and Jose De Gregorio say that weaker copper prices and higher global borrowing costs could lead to growth of less than 4 percent.

Raising Income

Since 1983, Chile has averaged economic growth of 5.2 percent a year, raising income per capita to about $19,100, the highest in South America, according to the International Monetary Fund.

Photographer: Martin Bernetti/AFP via Getty Images

Former Chilean President Michelle Bachelet casts her vote during the run-off presidential election in Santiago on December 15, 2013. Close

Former Chilean President Michelle Bachelet casts her vote during the run-off... Read More

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Photographer: Martin Bernetti/AFP via Getty Images

Former Chilean President Michelle Bachelet casts her vote during the run-off presidential election in Santiago on December 15, 2013.

Slower growth will make it harder for Bachelet to fulfill her pledges to boost spending on health and education without widening the fiscal deficit, said Jorge Errazuriz, a partner at BTG Pactual.

“Bachelet will run into a problem if the economy doesn’t grow at current levels and copper, mining and private companies’ income fall,” he said in a telephone interview from Santiago before the vote. “In that case, her tax reform won’t be enough.”

Bachelet plans to raise the corporate tax rate to 25 percent from 20 percent and end a 30-year incentive to reinvest profits that she says is being used to avoid taxes.

The changes will bring Chile more into line with its counterparts in Latin American, where Colombia has a corporate tax rate of 25 percent, and Peru and Mexico have 30 percent. Five years ago, Chile had a tax rate of 17 percent, half Colombia’s 33 percent.

Gradual Change

Bachelet says she will introduce tax changes gradually and denies Matthei’s allegation that her proposals would put Chile’s economic success at risk.

“Bachelet has done everything possible to reduce expectations that have been generated by her level of support, reiterating the gradualness of change,” said Robert Funk, who runs the center for public opinion studies at the University of Chile in Santiago.

While Bachelet won by the biggest majority since Augusto Pinochet took power in 1973, she also obtained the fewest ballots of any winning candidate over the same period as voter turnout slumped to 42 percent. That is the lowest turnout since 1958.

Wealth Concentration

“The low participation in elections is a consequence of the type of economic growth that Chile has experienced in the past years,” said Carlos Huneeus, executive director of the Center for the Study of Contemporary Reality. “The concentration of wealth and inequality are so immense that they don’t favor political participation.”

Bachelet won 3.47 million votes, compared with the 3.59 million Pinera obtained in 2009, the 3.72 million she won in her first election victory in 2005 and the 3.68 million Ricardo Lagos got in 1999. The two previous presidents won in the first round of voting.

“It’s not quite the mandate she wanted,” said Patricio Navia, a political science professor at New York University. “There isn’t a majority of Chileans that want radical changes, the majority stayed home and didn’t vote.”

Pinera, in a speech to congratulate Bachelet’s victory, said politicians would have to listen to those Chileans who voted and those that didn’t.

Popularity

Pinera’s popularity fell to a record low 27 percent last year as students took to the streets demanding free education from primary school to university. Chile has the most socially segregated schooling system in the OECD, with few of the poor entering the top performing schools, according to research released by the organization on Sept. 13, 2011.

Chile’s Gini index, a measure of the income gap in which zero represents perfect equality and 1 complete inequality, is 0.501, compared with 0.38 in the U.S. and 0.466 in Mexico, according to the OECD.

Bachelet said her victory was partly due to “the citizens who have marched through the streets in recent years.” We must “especially thank the young who have shown their desire to build a free, public education system with high standards,” she said.

To contact the reporter on this story: Javiera Quiroga in Santiago at jquiroga5@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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