Special report no.1 | Chile 2020 Context and categories of analysis by Mauricio Rojas
This Special Report inaugurates the series of publications by the FPP Political Analysis Laboratory. Its purpose is to present the general context and main categories of analysis that will be used in both the monthly Political Analysis reports and the weekly Political Events newsletter that the Laboratory will regularly produce.
Our era is defined by the conflicts inherent to the dispute over global hegemony between the declining power, the United States, and the emerging one, China. In purchasing power parity, China’s GDP already exceeded that of the United States in 2014, and its weight in the global economy rose from 7.6% in 2000 to 18.6% in 2018, while that of the United States decreased from 21.1% to 15% during that same period. The commercial and technological dispute is the most evident, but the political-military and geostrategic aspects are becoming increasingly visible, with great, widespread execution by China in the Belt and Road Initiative, also known as the New Silk Road, which already involves about 125 countries with a planned investment of more than 900 billion dollars, fundamentally oriented towards raw materials and infrastructure. For its part, the United States has responded by deepening its strategic alliance with India, as illustrated by Donald Trump’s recent visit there.
The United States faces a presidential election year, which will surely entail a shift towards internal politics, and a lower, more conciliatory profile at the international level. Its economic growth has been high within the context of developed economies, but it is beginning to slow down compared to the level reached in 2018 (2.9%, the highest since 2005), with a forecast of 2% for 2020 and 1.7% for 2021 (IMF, January 2020). However, domestic demand and especially employment are showing great strength (unemployment has not exceeded 4% since April 2018 and currently stands at around 3.6%), thus predicting the likely re-election of Donald Trump.
China is experiencing a major restructuring of its economy. Its annual growth rates are still high (between 6 and 7%), but considerably lower than historical ones, around 10%. Also, domestic demand and services have increased their relative weight compared to exports (whose weight decreased from 36% of GDP in 2006 to less than 20% in 2016-18) and compared to the industrial sector (which still shows very high levels, between 40 and 41% of GDP in 2016-18, although it is the lowest on record since 1971 and more than 6% below the 2005-11 levels). These changes are of key importance to the world economy, especially to the demand for industrial inputs such as minerals and metals (China absorbs, for example, around half of world copper imports). Politically, the country is experiencing a clear toughening, both internal and external, of its regime under the increasingly personalized leadership of Xi Jinping. The impressive demonstration of military strength in the 1 October 2019 celebration of the 70th anniversary of the founding of the People’s Republic of China did not go unnoticed. Nor have their efforts to develop what some have called “digital dictatorship,” tightly controlling access and use of information technologies.
It is in this context that the foreseeable impact of the coronavirus should be analyzed, which, according to the OECD 2 March report (Coronavirus: The World Economy at Risk), may reduce China’s growth to less than 5% by 2020, which has not happened since 1990. To compensate for its momentary weakness, China could intensify its demonstrations of geostrategic power, as well as internal repression and secrecy in the face of possible signs of discontent.
Four medium powers are also involved in several significant international episodes: Russia, the European Union, Iran and India. Russia and Iran carry substantial weight as producers and exporters of oil, gas and its derivatives. Their regimes are authoritarian, expansionist and also carry great military weight (Russia) or aspire to it (Iran). The European Union, still shocked by Brexit, is an area of considerable economic and cultural relevance, but of declining global influence and not so dynamic economies, while the opposite occurs with India, whose economic growth competes with China, but with a structure that is much more dependent on services and a more favorable demography.
Globally, in January the IMF predicted (World Economic Outlook Update: Tentative Stabilization, Sluggish Recovery?) a growth of 3.3-3.4% for 2020-21, which is somewhat lower than the previous forecast but better than the 2.9% reached in 2019. The key impulse of this growth would come from the emerging economies of Asia (5.8-5.9%), followed by Sub-Saharan Africa (3.5% in 2020-21) and Latin America lagging way behind (1.6-2.3%). In turn, developed countries maintain a slow growth rate (1.6%), conditioned by the low dynamism of the Eurozone (1.3-1.4%) and Japan (0.7-0.5%).
This forecast took a hard hit when corrected and lowered for 2020 in the mentioned recent OECD report, which places an appraisal on the overall impact of the coronavirus. In a relatively optimistic scenario (on the assumption “that the epidemic peaks in China in the first quarter of 2020 and outbreaks in other countries prove mild and contained”), global growth would be reduced to 2.4%. In a pessimistic scenario (“A domino scenario: broader contagion”), global growth would be reduced to half of what was previously predicted by the OECD (2.9%), thus palpably reflecting “the key and rising role China has in global supply chains, travel and commodity markets”.
Since the end of the commodities boom, at the beginning of the last decade, Latin America entered a phase of serious economic difficulties and growing social and political instability. Thus, the well-known structural weaknesses of the region were revealed once again, in economic terms (high dependence on primary exports, low sophistication of their economies and poor levels of investment and formation of human capital), as well as in social and institutional terms. In recent years there has even been a repeated decrease in GDP per capita at the regional level, which has been especially delicate in South America due to the Venezuelan collapse and the difficulties of the area’s big economies, Brazil and Argentina, with an OECD forecast of -2% for Argentina in 2020, thus closing its third year of decline with a cumulative fall in GDP per capita close to 10%. This has accentuated the significant Latin American lag compared to the dynamism of emerging economies in other regions.
One of the most important consequences of this unsatisfactory economic performance has been the increase in regional poverty levels (from 27.8 to 30.8% between 2014 and 2019), especially extreme poverty (which increased from 7.8 to 11.5% in that year range), according to data from ECLAC’s Social Panorama of Latin America 2019 report. In absolute terms, ECLAC estimates that by 2019 the number of people living in extreme poverty might have increased by 26 million compared to 2014. Another essential component of today’s Latin American societies is that the emerging middle classes have seen their recent economic and social progress threatened, turning them into a major player in the social mobilizations that have shocked various countries in the region. Such fragility of the new middle classes has also been pointed out as a central element of the current Chilean crisis.
This economic-social evolution is key to understanding the weakening or fall, in the mid-2010’s, of a series of left-wing populist regimes, but it has also had and will continue to have a strong impact over rulers of other political orientations, making way for highly unstable situations (as in Peru, Bolivia and Ecuador) and for the emergence of a spectrum of new populist leaders, as we have seen recently in Argentina, Brazil, Mexico and El Salvador. In turn, the institutional deterioration and advancement of corruption and criminal mafias have been evident. These circumstances largely determine the current course of Latin America, generating an increasingly felt demand for order and repression of criminal elements. It is no longer a conflict between left and right, but something much simpler and more vital: to reestablish the most elementary foundations of a life in peace.
In the context of this highly unstable and tumultuous panorama, the Chilean social-asocial uprising has had a great impact: the star country of the region, whose advances, institutional strength and stability were an example to follow for many, has completely and unexpectedly sunk into a whirlwind of virtually unparalleled protests, vandalism and violence. This has given an ideological respite to the ill-fated Venezuelan regime, as well as to the coordinating organizations of Castro-Chavism at the regional level, such as the Sao Paulo Forum, and other fronts of the Latin American left, such as the recently formed Puebla Group.
Since October 18 (18-O) the national political situation has been determined by the confluence of large social protests and the action of a large number of anti-system actors seeking to destabilize the country by different means (including in many cases the use of violence), which comprise what we will call the “insurrectionary pole”.
Social protests have their origin in a vague discontent that largely reflects precariousness, enhanced by the insufficient economic performance of recent years of the most vulnerable sectors of the emerging middle classes, as Enrique Correa pointed out in a recent report entitled The Chilean Crisis: Current Situation And Scenarios (2/17/2020): “The origin of the crisis is the economic collapse of the most vulnerable sector of the middle class. They are the newcomers to the middle class, with poverty just around the corner. Satisfied with their progress in getting out of poverty, and in fear – sometimes panic – at the danger of returning to being poor. For several years, studies and surveys showed this sector with an ambivalence of feelings: hope and fear. Hope in social ascent, and fear of returning to original poverty.”
The large gap between the aspirations and expectations of the new middle classes and their everyday hardship and vulnerability would thus be the engine of their growing frustration and impatience, which is joined by a demand for “fair treatment”, dignity and an end to abuse.
Another element of the utmost importance in order to understand the actions and mobilization capacity of the most radical and violent groups, is the presence of large youth groups with high levels of exclusion, school failure, frustration, alienation and the deterioration of values. These groups have a significant proportion of so-called ni-ni’s (they neither study, nor work) and other groups socialized in neighborhood cultures with significant levels of violence and lawlessness. These young people, in the opinion of Universidad del Desarrollo researcher José de la Cruz Garrido, “have nothing to lose, much less to gain.” De la Cruz gives us the following tentative panorama for Santiago, which, undoubtedly, is reproduced at different magnitudes in other areas of the country: “Considering the type of desertion, chronic absenteeism and the fact that around 400 points in Santiago are controlled by drug cartels, we can estimate that between 150,000 and 320,000 minors could be human capital for any practice that involves the commission of crimes” (El Líbero, 12/1/2019).
Without a doubt, the most disruptive fact – which also has a key importance for the future of the country – has been the practically uninterrupted offensive of the insurrectionary pole, against which the Government and the State institutions have shown notable insufficiency, being unable to maintain the State of law, effectively transferring the control of areas of the national territory to the hands of various violent and criminal groups. The opposition, on the other hand, has not only been ambiguous in condemning the actions of these violent forces, but has even used them opportunistically to pressure the Government. We are, in summary, facing the deepest, most unparalleled political and institutional crisis since 1973, which has strongly impacted the economy as well as social and political life.
On the other hand, the economic forecasts are not very encouraging, as could be expected as a result of the shock of doubt and fear generated after 18-O and that will continue due to the persistence of violence and constitutional uncertainty. The result has been a sharp decline in growth projection (around 1.3% for 2020 according to the estimate of the Ministry of Finance, but even less than 1% according to JP Morgan, among others), a decrease in investment and its subsequent negative impact on employment and wages (which had already been hit by the significant increase in the labor supply caused by the wave of immigration of recent years), particularly in the most vulnerable sectors. Even an increase in poverty can be expected, which had not happened in more than 30 years. In turn, the price of copper, directly affected by the slowdown in the Chinese economy and the general instability of the international scenario, will surely be below US $ 2.85 per pound, which was the 2020 estimate by Cochilco at the end of January.
This unfavorable development will cause significant fiscal hardship that will contrast with the projected expansion of public spending (around 10% in 2020), with a public deficit that could reach about 4.5% of the GDP this year, and a public debt that will exceed 30% of the GDP and that, according to estimates by the Minister of Finance, Ignacio Briones, would reach 38% in 2024, representing a more than 10% increase compared to the pre 18-O situation.
The most politically relevant consequence of this complex economic scenario will probably be a widespread increase in frustration and discontent that will further boost protests and demands for greater redistributive commitments.
Finally, it is necessary to note the very high level of discredit and disapproval reached by institutions in general and those that form the political framework of democracy in particular. The political class as a whole is in a critical situation, and so are the President, Congress, political parties and the most relevant political figures (except for Joaquín Lavín, who – according to a survey by Cadem – is the only politician with greater approval than disapproval).
This set of circumstances puts Chile under a perspective that predicts: (1) the persistence of instability and strong intermittent outbreaks of violence, and (2) a scenario highly conducive to the emergence of populist leaderships as the two fundamental conditions of a “prepopulist situation” (Ernesto Laclau): wide social discontent and a vacuum of representation or of political channeling of it.
Keys points for the national political agenda
Three conflicts have rearranged the national political agenda from the social-asocial outbreak that started on 18-O. Their presence and interrelation will remain decisive for at least the next two years.
The first and most decisive is the violent and repeated breakdown of public order and the failure of State institutions to maintain it. Nothing indicates at the moment that order can be restored effectively. On the contrary, the successes achieved by various criminal and violent groups have indeed strengthened their territorial presence, prestige, recruitment capacity and material resources. A frontal fight against the organizers of violence would require deep changes in the performance and control of a now highly questioned police apparatus, as well as, above all, broad political support that the current administration lacks, confronted with an opposition that seems more willing to harass the government than to add their forces to this task, and a public opinion that is not only very unfavorable, but that is even prone to accept various violent behaviors at a surprisingly high degree (for instance, the latest CEP survey shows that 42% of people between 18 and 30 with a higher education answered “always”, “almost always” or “sometimes” to the question: “How often would you justify participating in roadblocks or destruction as a form of protest?”).
The second conflict is the constitutional one, with its various facets and stages, its polarizing dynamics and the strong tensions it causes, especially within the center-right. Both the result of the April plebiscite and a possible Constitutional Convention will be decisively conditioned by the development of the previous conflict between order and violence. If violent activity is reactivated and maintained at a high level, the relevance of the Rejection option in the plebiscite will increase and, in turn, the forces of the insurrectionary pole will tend to use their disruptive force to determine the course of both the elections and, especially, an eventual Convention. Furthermore, there is the risk that a significant part of the left, with the support of “the street” and the perpetrators of violence, will bid on the “constituent trap” proposed by Fernando Atria and Guido Girardi, among others, that is, to circumvent the two-thirds requirement, thus leaving rights, safeguards and fundamental institutions out of the Constitution, to then regulate them by simple majority. There will also be a strong pressure from the insurrectionary pole to promote, as Luis Mesina proposed, the transformation of the Convention into a Constitutional Assembly of unlimited power. The result of all this would be an even more divided country, as well as a lack of legitimacy of the results of a Convention dominated by the confrontational spirit and siege by radical forces.
Finally, the two conflicts described above will be closely conditioned by a third arena of conflicts related to social demands and, as we have already seen, the low capacity of the economy to satisfy them. In this regard, years of frustrations and increased mobilizations are projected, which will play a key role in terms of both public order and constitutional debate. This same situation will put pressure on the Government to carry out an even more expansive redistributive spending policy, thus increasing the public deficit and perhaps even jeopardizing our macroeconomic stability.
The insurrectionary pole
The rise of the insurrectionary pole has been the determining factor of the political situation since 18-O. Its extension goes from the Communist Party and other parties and movements of the radical left, including a strong and novel anarchist component as well as Trotskyist remnants and militant feminism, to the ‘barras bravas’ (football hooligans) and criminal gangs associated with street crime and drug micro trafficking, who have assumed a leading role as local organizers of the most violent actions, such as the hundreds of attacks on police barracks, looting and arson.
Among its central components, there are also various social organizations with radicalized directives, such as many of those that form part of the Social Unity Board and others rooted in the student world such as ACES or Confech. In addition, communication on social networks plays a key role, including, among others, Piensa Prensa, ChileOkulto, Gamba, El Desconcierto, Archivando Chile, No Nos Callarán and Chile Despierta, along with international media such as the TV channels Russia Today (RT) and Venezuela’s TeleSur. It is also worth mentioning networks such as Anarquismo, AnArquismo, and Anarquismo en PDF.
The central point in this context is to understand that we are not facing a cohesive movement, but a multitude of “anti-systemic tribes”. Although not organically coordinated or ideologically unified, they converge and support each other in the attack on institutionality, using a great diversity of media that ranges from the promotion or support of accusations against various authorities in Congress to the infiltration of the massive peaceful manifestations of citizen discontent, urban guerrilla, the occupation and vandalic destruction of public spaces, looting, incendiary attacks of a terrorist nature, and the attacks against Carabineros (the Chilean police).
The mobilization and synchronization of this action has a dispersed and unstable morphology, typical of social networks and a highly spontaneous insurgency, which makes it very difficult both to understand and to contain the phenomenon. However, the most significant fact is the diversity of strategic objectives that hides behind its tactical confluence. In broad strokes we can distinguish two large, very different objectives: on the one hand, taking over state power, on the other, weakening it until it becomes impotent.
Among the most politically-oriented sectors, that is, the Communist Party, its Frente Amplio peripheries and groups with Trotskyist roots, the orientation is clearly towards the conquest of state power by overthrowing the current rulers, which is materialised in the demand for the resignation of the President and the ever more open calls for insurrectional uprising, like the one made recently by communist mayor Daniel Jadue.
Very different is the purpose of the groups of anarchist orientation, whose central ideology is anti-statism (as well as their hatred of religiosity that derives in the desecration and burning of churches, with their classic examples of Spain before the civil war and its sad Chilean replicas). Also very different is the purpose of criminal organizations whose fundamental objective is the weakening of the State and, in particular, of its police forces, in order to be able to control and expand their territories with full freedom through their own apparatus of force.
In any case, although their articulation is unstable, all these diverse actors now converge and use each other. In addition, the most opportunistic wing of the ex-Concertacion also uses them as an element of pressure on the Government, thus playing with a lethal fire that could easily get out of control – and from which they themselves would hardly be safe.
The Government and the opposition
The situation of the Government and especially the President is characterized by his great weakness. His citizen support is minimal and the coalition that sustains him, Chile Vamos, is deeply internally stressed and pressured on its right flank by the Republican Party of José Antonio Kast. In turn, his parliamentary leverage is limited and the bridges laid towards the more moderate opposition are fragile and unstable, despite having resigned to a series of central proposals of the Government Program and having launched an important redistributive package that will significantly raise fiscal spending and, in perspective, tax pressure. For its part, public order has not been fully restored, and everything indicates that things will get significantly worse as we approach the 26 April plebiscite. This is the decisive point for the sustainability of the Government as we know it today: A return to the spiral of violence of October-November would lead us to a totally unpredictable situation, apart from making the plebiscite unfeasible or illegitimate.
The Government’s main bid in Congress focuses on three initiatives:
(1) Creation of the guaranteed minimum salary, which would allow every full-time worker to earn at least a gross income of 360,200 Chilean pesos per month (around US$ 450) through a State-funded subsidy amounting to 59,200 Chilean pesos (around US$ 74) for those who earn the minimum (301,000 Chilean pesos, equivalent to US$ 376). In addition, the benefit extends decreasingly to those who earn up to 384,363 Chilean pesos (US$ 480).
(2) Pension reform, with a 6% increase in contributions from the employer, half of which will go to redistribution and the other half to personal savings. This additional 6% will be administered by the State through the Social Security Administrative Council (CASS).
(3) Constitutional reform to allow the Armed Forces to protect critical infrastructure without necessarily decreeing a state of exception. The initiative establishes that in “case of serious alteration of public order or serious damage to the security of the Nation”, the President will be entitled “to declare a state of alert intended to protect critical infrastructure.”
On the other hand, the opposition has not capitalized at all the revenues of the Government’s weakening, but on the contrary, has showed great fragmentation and a very significant loss of citizen support and registered members. Its more moderate flank has launched an offensive to accept the President’s call to achieve a great national agreement around the restoration of public order, combined with the social agenda and the reactivation of the economy. In contrast, the left flank of the opposition, especially the toughest sectors of the insurrectionary pole, pressure and harass the agenda through “funas” (public shaming) and various aggressions, which have even affected the Frente Amplio members who signed the Agreement for social peace and the new Constitution. The parties of the former Concertación are thus facing a constant unresolved dilemma: either distance themselves and condemn with absolute clarity the insurrectional sectors (including the PC and its parliamentary allies), and pay the high price that this would entail in electoral terms, or continue to ally itself with their parliamentary expressions and maintain an opportunistic ambiguity regarding the actions of their extraparliamentary sectors, thus stressing its own internal cohesion.
From the previous analysis we can outline a short and medium term base scenario whose central features are the following:
- A strategic tie of order vs. violence
- Weak government, recurrent offensive of the insurrectionary pole, ambiguity, fragmentation and opportunism of the opposition, growing tensions in Chile Vamos and strengthening of the Republican Party (situated to the right of Chile Vamos).
- Increasing political polarization and victory of the Approval option in a highly contested plebiscite and with a significant Rejection vote.
- Constitutional Convention confronted and held hostage by “the street”.
- Persistent uncertainty, instability, insecurity and violence until – at least – the end of the work of the Convention and the presidential election at the end of 2021.
- Economic fragility, stagnation of per capita income, high unemployment, a downward trend in wages, permanent widespread discontent, new demands and social mobilizations, macroeconomic vulnerability.
- Vacuum of democratic representation, emergence of populist and/or authoritarian leadership, a strongly polarized 2021 presidential election.