Political Risk Latin America Blog @PolRiskLatam

Chile: Protests Continue As Police Face Off With Demonstrators

Posted in News and Articles, Political Risk by politicalrisklatam on August 26, 2011

by Latin American News Dispatch, August 24th, 2011.

Chile’s Central Workers Union, an umbrella organization consisting of several labor unions, launched a 2-day national strike Wednesday morning, supported by protesting students and the opposition Concertación coalition.

While the organizers insist the strike and its accompanying public protests are peaceful, fringe groups collided with police on Wednesday shortly after the strike began. Protesters in the capital of Santiago stoned buses and police responded with tear gas and water cannons. At least 18 flaming barricades were set up by protesters in the capital of Santiago and clashes between police and demonstrators occurred in Valparaíso and Concepción.

“We don’t want violence, our fight is not versus the police or to destroy commercial shops … our fight is to recover the right to education, on that we have been emphatic and clear,” said student leader Camila Vallejo.

The protests, which began in May of this year with students asking for educational reforms, have broadened to include demands ranging from a new constitution to a revamped tax system. The 48-hour strike is the first of its kind since the since the fall of a 27-year dictatorship in 1990.

“We’re all worried about the social climate,” said Finance Minister Felipe Larraín, who added that the strike was illegal and said the government would not tolerate roadblocks. (continue reading… )


Education in Chile: We want the world

Posted in News and Articles, Political Risk by politicalrisklatam on August 11, 2011

by Patricia Navia for The Economist, August 11th, 2011.

A trial of strength between students and the government.

It began on August 4th with the metallic clink of a few pots and pans. By nightfall, thousands of people were on the streets of Santiago banging kitchenware, a form of protest last heard under the dictatorship of General Pinochet. This time the cacerolazos, as they are called, are being staged in the name of educational Utopia—and in response to a cack-handed government ban on marches.

Chile’s school system is the least bad in Latin America, according to the OECD’s PISA tests, which compare educational attainment across countries. But that does not make it good. And the overall performance hides huge disparities. Analysis done in Chile of the test results in the 65 countries that took part finds that it ranked 64th in terms of the variance of the results according to social class. Rich pupils get good private education; poor ones are condemned to underfunded, dilapidated state-funded schools.

This “educational apartheid” as Mario Waissbluth, a campaigner, puts it, is widely blamed for the fact that Chile remains a highly unequal society, despite its dramatic progress over the past quarter of a century in reducing poverty. “The kids from the posh suburbs study in those suburbs, go to university in those suburbs, get jobs as company executives in those suburbs and employ friends from the schools they went to themselves,” says Mr Waissbluth.

The centre-right government of President Sebastián Piñera agrees. Chile inherited from the dictatorship a voucher system under which the government pays money to the school of the parents’ choice. In November the government unveiled a plan to increase the value of the voucher, especially for the poorest children. As well as trying to attract better teachers to state schools, the government will set up 60 lycée-style “schools of excellence” aimed at bright children from poor families.

Students and teachers responded by demanding the abolition of all for-profit education. After they staged big marches along the Alameda, Santiago’s main thoroughfare, Mr Piñera last month sacked his unpopular education minister. The government also said it would draw some $4 billion from its reserve fund of windfall copper revenue to pay for better schools. (continue reading… )


Student Protests Grow in Chile

Posted in News and Articles, Political Risk by politicalrisklatam on August 5, 2011

by Americas Quarterly Blog, August 4th, 2011.

The leaders of widespread student and faculty protests in Chile yesterday announced plans to mount a national strike and an additional series of mass demonstrations to contest a far-reaching education reform bill supported by the government. In response, Chilean Interior Minister Rodrigo Hinzpeter indicated that his office would deny to students permission to demonstrate in downtown Santiago where prior confrontations with police have caused significant property damage: “The march will not be approved by our government due to the damage caused to property, bystanders and police. We will take all necessary measures to enforce the decision. It is time for the demonstrations to end.”

According to student leaders, the government’s proposed education reforms would allow for excessive levels of privatization in the education sector and lead to higher levels of indebtedness among graduates. “We analyzed the ministry’s proposal and students considered it a setback because it allows profit in the education sector. We do not see any structural changes, but only further privatization and perpetuation of student debt,” said Univeridad Católica de Valparaíso official Nataly Espinoza.

Chile has long struggled with education reform initiatives and these latest demonstrations are the culmination of more than two months of smaller protests across Chile. Students are calling for a halt of the trend toward privatization in education and other basic services such as public transportation.

Chile mine strike raises fears for copper supply

Posted in News and Articles, Political Risk by politicalrisklatam on July 27, 2011

by Javier Blas for Financial Times, July 26th, 2011.

Copper prices rose on Tuesday as a strike at the world’s largest mine of the metal entered its fifth day, stoking worries of a stalemate which could reduce supplies.

The Escondida mine, located in the Atacama desert in Chile, accounts for around 7 per cent of global copper production. Although the strike has been, so far, too short to have a meaningful impact on physical copper markets, investors and traders worry that the lack of negotiations between the miners and the company could lead to a prolonged outage and potentially extend to other mines.

RBC Capital Markets said in a note to clients that the strike was providing some support to the copper market, but warned: “These industrial actions are generally short lived.” Investors are, however, worried that the strike could continue.

The operator of Escondida said the company would not engage in talks with the miners, which are demanding higher bonuses and salaries after a rally in copper prices of 32.7 per cent since January 2010, until they stop the strike. The miners have requested a second-round of government-mediated negotiations. (continue reading… )

Rise of Consumer Credit in Chile and Brazil Leads to Big Debts and Lender Abuses

Posted in News and Articles, Political Risk by politicalrisklatam on July 25, 2011

by Alexei Barrionuevo for The New York Times, July 23rd, 2010.

For Ana María Silva, what began as purchases of perfume and two pairs of shoes spiraled into a credit card nightmare, as her debt multiplied tenfold in five years — and not all because of her spending.

Ms. Silva was among 418,000 clients in Chile who fell behind on their payments and had their debts repackaged by the retailer La Polar, which raised interest rates and extended loan terms without their knowledge. In early June, it came to light that executives at La Polar had been unilaterally renegotiating clients’ debts for more than six years. The news stunned Chileans and has become one of the biggest financial scandals of Chile’s 20-year economic boom.

“I share blame in this, but this company should have been more honorable and transparent,” said Ms. Silva, 30. “They were targeting people with more modest means. This became a vicious cycle that was never going to end.”

The scandal has underscored how South American countries — including Chile and Brazil, two of the region’s healthiest economies — are going through growing pains as the use of credit grows. The credit-fueled spending has driven extensive economic growth. But it has also opened the door to abuses, as credit issuers have used predatory techniques to lure customers, particularly young and less affluent ones, in countries where regulation is scant, annual interest charges can top 220 percent and consumers cannot seek bankruptcy protection, economists and consumer defense groups say. (continue reading… )

a María Silva, what began as purchases of perfume and two pairs of shoes spiraled into a credit card nightmare, as her debt multiplied tenfold in five years — and not all because of her spending.

Cabinet Changes in Chile: Piñera Reshuffles the Deck

Posted in News and Articles, Political Risk by politicalrisklatam on July 20, 2011

by Roque Planas for Americas Society / Council of the Americas, July 19th, 2011.

Facing student protests, striking copper miners, and an ongoing energy controversy, Piñera shuffled his cabinet on Monday for the second time this year. Piñera ordered eight cabinet changes in all, but all but two ministers will trade places with others. The two new additions—Senators Pablo Longueira and Andrés Chadwick—both hail from the Independent Democratic Union, the more conservative party in Piñera’s two-party coalition. With the cabinet shuffle, Piñera hopes to address the social unrest that has pushed his approval rating down to 31 percent June from its peak of 63 percent in October, following the rescue of the 33 trapped miners.

Education Minister Joaquín Lavín’s move to the Ministry of Social Planning aims to defuse a standoff with tens of thousands of student protesters that has dragged on since April. Lavín’s approval rating plummeted by 24 points to 46 percent, according to Adimark, and Chileans now rate education as the area the Piñera administration’s weakest spot. Piñera proposed a $4 billion investment to finance scholarships and other investments in education, but students protesters rejected Piñera’s plan out of hand for opening the door to allowing for-profit schools, which is currently prohibited by law. Lavín’s departure from the Education Ministry pleased student protesters, who continue to occupy at least 100 hundred high schools and universities.

Meanwhile, Mining and Energy Minister Laurence Goldborne traded places with Public Works Minister Hernán de Solminihac in a move that some saw as a reward for Goldborne. Public confidence in Goldborne soared last year because of the role he played in rescuing the 33 trapped miners. His move to the Public Works Ministry comes just days after state copper company CODELCO went on a 24-hour strike—the union’s first in two decades. By moving to Public Works, Goldborne takes on a position of equal or greater importance—the ministry leads reconstruction from the 2010 earthquake—while avoiding politically painful confrontation with the copper miners’ union, reports the Financial Times. He also avoids continuing to associate himself with the controversial HydroAysén dam project, which Piñera approved despite large-scale environmental protests that drew tens of thousands to the streets. (A Chilean court halted construction of the $3.5 billion project on June 20, after opponents filed an injunction.) Goldborne is also widely viewed as a leading conservative possibility for the 2014 presidential elections, in which Piñera will have to sit out due to a constitutional prohibition on consecutive reelection. In a column for La Tercera, political scientist Patricio Navia referred to Golborne’s move as “the official beginning of his presidential run.”  (continue reading… )

Chile’s middle class people power

Posted in News and Articles, Political Risk by politicalrisklatam on July 19, 2011

by Janie Hulse for Financial Times – Beyond Brics, July 19th, 2011.

It all must seem so unfair. Chile is one of the world’s most politically stable countries. The economy is growing gangbusters. And yet Sebastian Piñera, the president, is increasingly unpopular.

His approval rating has sunk to 31 per cent. The country has been riven by strikes at Codelco, the state-owned copper miner, and elsewhere; it has been shaken by environmental protests over a multi-billion-dollar hydroelectric project in the south of the country; and it has been surprised by massive student protests – in June, some 80,000 students took to the streets, the largest such gathering since the transition to democracy in 1990. What to do? Piñera’s response: re-shuffle eight ministers in his 22 strong cabinet.

The reshuffle, the second in his government, is a sign that Piñera is listening to the country and aware of the need for change, although there are only four points about the shuffle worth noting.

First, two Senators from the governing party’s coalition partner, the conservative UDI, have been given positions as economy minister and government spokesman. That could mute UDI criticism and make it easier for Piñera to govern.

Second, the ever-popular Laurence Goldorne, who won his spurs during the celebrated government rescue of 33 trapped miners, is moved from energy and mining to public works – which gained higher visibility following last year’s major earthquake. No change in mining policy is expected.

And, third, Felipe Larraín remains in the post of finance minister. Financial markets will be relieved. (continue reading… )


Codelco’s strike: the start of something bigger?

Posted in News and Articles, Political Risk by politicalrisklatam on July 12, 2011

by Jude Webber for Financial Times – Beyond Brics, July 11th, 2011.

It wouldn’t be hard to beat the last big strike at Codelco, the Chilean state copper miner, 18 years ago. It lasted for 45 minutes. This time around, workers walked off the job from 4 am and union leaders were delighted with the turnout of the 24-hour stoppage, called to protest restructuring plans and fears that the government is plotting to privatise the company (despite its assurances to the contrary).

A day-long strike may still not sound much – but its ramifications could be a lot bigger than any short-term dent in the price of copper.

“The strike is a total success. Radomiro Tomic, Chuquicamata, Gabriela Mistral, El Salvador, El Teniente, Andina and Ventanas are all paralysed,” said Raimundo Espinoza, head of the Federation of Copper Workers, listing the company’s divisions. He urged the government to drop any thought of privatisation or “undoubtedly” face more strikes.

Despite the disruption, the one-day stoppage is not expected to have any lasting impact on production targets for this year, though it has helped unsettle markets. (continue reading… )

Chile’s Polar struggles amid scandal

Posted in News and Articles, Political Risk by politicalrisklatam on June 24, 2011

by Jude Webber for Financial Times – Beyond Brics, June 22nd, 2011.

A bit of good news at last? The picture at Chile’s fourth-biggest retailer, La Polar, has been unremittingly black in recent days as an unprecedented – and unexpected – credit scandal has snowballed.

A share crash (nearly 80 per cent since June 9) has wiped nearly $1bn off the company, the interim chairman quit this week and the market reckoned the firm was heading for bankruptcy or takeover after it admitted that executives restructured 475bn pesos of overdue credits without telling either the 400,000 customers affected, or the board.

After a wave of dismissals, another 11 executives have been given their marching orders.

But perhaps La Polar can yet be saved, says Francisco Errandonea, an analyst at Santander Investment in Chile.

An extraordinary shareholders’ meeting on Wednesday approved a $212m capital increase after pension funds set strict conditions for their support – including a freezing of the company’s investment plan, a halt to expansion in Colombia and no more executive stock options. Though almost half the company’s original proposal, that will go a long way to keeping the company afloat, Errandonea says. The price for the capital increase will be set at a new shareholders’ meeting, at a date yet to be announced. (continue reading… )

Chile: more growth, more rate hikes

Posted in News and Articles, Political Risk by politicalrisklatam on June 21, 2011

by Jude Webber for Financial Times – Beyond Brics, June 21st, 2011.

More growth but continued risks to inflation, ergo more rate hikes. That is the updated message from Chile’s central bank in its quarterly monetary policy report.

José De Gregorio, central bank president, said the bank’s base case scenario was now for growth of 6 to 7 per cent in 2011 – up from the previous forecast of 5.5 to 6.5 per cent because of faster first-quarter growth.

This chart gives a summary of the bank’s updated outlook.

(continue reading… )