Bachelet Sworn In as Chilean President as GDP Slowdown LoomsJaviera Quiroga
Michelle Bachelet swore in as president of Chile today, three months after winning a landslide election victory on pledges to provide free education for all.
She takes over from billionaire investor Sebastian Pinera, who oversaw economic growth averaging 5.7 percent in Latin America’s wealthiest nation. Constitutionally banned from standing for consecutive terms, Bachelet previously governed from 2006 to 2010.
The former president won December’s election with the biggest majority since the end of Augusto Pinochet’s dictatorship in 1990 and holds a majority in both chambers of Congress. With a four-year mining boom coming to an end, she takes over an economy that is growing at its slowest pace since 2010 and with consumer prices rising at the fastest pace in almost two years.
“The economy is technically slowing down and normalizing from an investment boom that lasted more than expected,” said Rodrigo Wagner, professor of economics at Tufts University and Universidad de Chile. “Now everything will depend on China´s behavior, the decisions of mining multinational companies and energy costs.”
Copper, which accounts for more than half of Chile’s exports, fell close to the lowest in four years yesterday after China’s exports unexpectedly tumbled.
Bachelet was sworn in by Isabel Allende, the daughter of former President Salvador Allende, who died in the military coup of 1973. Isabel Allende is now president of the Senate.
Bachelet’s father was imprisoned and tortured to death by the military regime, according to a report by the state forensic medical service. She later went into exile in Australia and then East Germany.
The new president has promised $15.1 billion in extra spending after three years of protests over the quality of education pushed Pinera’s popularity to a record low. The spending will be financed by an increase in the corporate tax rate to 25 percent from 20 percent and the abolition of a 30-year incentive to reinvest profits that she says is being used to avoid taxes.
During her first term in office, Bachelet poured money into Chile’s sovereign wealth fund and then used the money to ease the impact of the global recession in 2008. She ended the period with an approval rating of 78 percent, the highest of any president since the return of democracy, according to Santiago-based polling company CEP. Pinera is finishing his period in office with a 50 percent rating.
Policy makers at the central bank forecast growth of 3.75 percent to 4.75 percent this year, while analysts surveyed by the bank put the figure at 3.7 percent.
The Imacec index, a proxy for gross domestic product, rose 1.4 percent in January from the year earlier, the slowest pace since the aftermath of an earthquake that devastated the center-south of the country in February 2010. Manufacturing output has declined on an annual basis in five of the past six months.
Still, the outgoing administration has forecast growth of 4.9 percent for this year and blames the recent slowdown, at least partially, on Bachelet’s plans to raise taxes.
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.
Today´s ceremony was attended by the presidents of Brazil, Paraguay, Uruguay, Argentina, Bolivia, Colombia and Mexico, and the Vice President of the U.S., Joe Biden.