LatinFinance - January/February 2018 - 25

CHILE
ECONOMY

After a decisive election victory, Sebastián Piñera has promised to unlock
an investment logjam and revitalize Chile's sluggish economy. Once again, he has
the global economy on his side. By Tom Azzopardi

A running start
the second round of voting, prompting his
crushing victory over Guillier. The day after
the election, share prices rocketed, recovering almost all the losses from the previous
four weeks.
A global tailwind
Piñera, who was president from 2010 to
2014, is a billionaire who made his fortune
with well-timed bets on the stock market.
He appears to be applying the same sense of
timing to politics.
Growth and investment have stagnated
in the past four years, hit by a sharp drop
in the price of copper, Chile's main export.

Source: Reuters

hileans had expected a close
finish. In the end, it was a landslide.
On December 17, Sebastián Piñera was
elected president of Chile with 54.6% of the
vote, easily beating Senator Alejandro Guillier, the candidate of the fractured government coalition.
Although Piñera had been the favorite
since the start of the year, campaigning on
a promise to reinject badly needed dynamism into the country's sluggish economy,
the results of the first round of voting in
November had shocked supporters and
pundits alike.
Piñera obtained just 36% of the vote in
the first round, much less than the 44%
predicted by the polls and well below the
majority needed to prevent a runoff vote.
Left-wing journalist Beatriz Sánchez got
20.3% the vote and nearly beat Guillier to
a place in the runoff. In the congressional
elections, neither the ruling center-left
Nueva Mayoría coalition nor Piñera's rightwing Chile Vamos alliance obtained a clear
majority, while Sánchez's Frente Amplio
emerged as a third force in Chilean politics.
Seeing the first-round results and facing
the possibility that Piñera might not become president, especially if Guillier could
attract the backing of Sánchez's supporters,
investors panicked. The IPSA index on the
Santiago Stock Exchange tumbled 11% after
the first round, falling from an all-time high
in October.
The same fears spurred Piñera's supporters to the polls in greater numbers in

Messy reforms of the tax code and labor
laws under President Michelle Bachelet
and a series of corruption scandals,
although minor compared to the graft
uncovered in Brazil and other countries,
had only increased uncertainty among
businessmen. Many questioned whether
the Chilean miracle, three decades of solid
growth, was over.
But now Chile's luck appears to be
changing. Conditions in the global
economy have improved sharply over the
last year. Fears of a hard landing in China,
Chile's largest trading partner, have dissipated. Europe is finally bouncing back.
And the risk of a global trade war has faded.
Closer to home, major economies in the
region, including Brazil and Argentina, are
on the mend.
Critically, the price of copper has risen
by around 50% over the past 18 months.
The Chilean peso, although stronger than
a year ago, has not risen to uncompetitive

CAMPAIGN PLEDGES: Chile's President-elect Sebastián Piñera has promised a return of economic
growth

January/February 2018 - L ATINFINA NCE.COM 25

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