2/7/2017 ChilesPathtoDevelopment:KeyReformstoBecometheFirstDevelopedCountryinLatinAmerica|TheHeritageFoundation

REPORTAmericas
ChilesPathtoDevelopment:KeyReformstoBecometheFirstDevelopedCountryin
LatinAmerica

October15,201329minread

Cristi&#225nLarroulet

FindingthebestpathtoleadChiletowardeconomicdevelopmenthasbeenacontinuous
taskofChileangovernmentsandleadersduringthelastcentury.Themissionofbuildinga
societyofopportunitieswhereeachpersonhasthechancetoreachpersonalfulfillment,
andcanlivewithdignityandwithoutpovertyseemsnowcloserthaneverbefore.

Afteraperiodofeconomicslowdownintermsofcompetitiveness,jobcreation,and
growthduringthesecondhalfofthepastdecade,anewcenterrightgovernmentwas
elected.PresidentSebastinPieraskeyreformsintheeconomic,educational,social,and
institutionalfieldsareshowingthatChileisagainprogressingatafasterpaceandinthe
rightdirection.Despitetheextrachallengeofhavingtodealwithreconstructionafterthe
damagescausedbytheFebruary27,2010,earthquakeandtsunami,thecountryhas
regainedeconomicgrowth,expandingopportunitiesthroughemploymentandeducation,a
newsocialpolicybasedonautonomy,responsibilityanddignity,andthebuildingof
modernandreliableinstitutions.

Ifthecountryisabletosustainthismomentumandconvictionthroughcurrentpublic
policies,attheendofthisdecadeitwillprobablybecomethefirstfullydevelopedcountry
inLatinAmerica.

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PursuitofDevelopmentNotNewforChile

Chilehaspursueddevelopmentformorethanacentury.NumerousChileanpresidentsand
othernationalleadershavesoughttotransformChileintoacountrywithoutpovertyand
withhighlevelsofeconomicprosperityandhumandevelopment.

FormanyChileanleaders,developmenthadbecome,inspiteofhistoricalefforts,
impossibletoaccomplish.Theseleadersmarkedoutsomestructuralobstaclesthatseemed
verydifficult,ifnotimpossible,tochange.SomeexamplesoftheseobstacleswereChiles
remotegeographiclocation,thecharacteristicsofitslongterritory,andsometimeseventhe
Chileanculture.Atthattime,thestructureofoursocietyandhowthepropertywas
conformedwasoftenviewedaswhatmadethedifferencebetweenprosperityandpoverty.

However,realitywasmuchbetterthanwhatsomeleadersandcitizensbelieved.
Increasinglyrobustempiricalevidence(suchasbyDavidS.Lanes,RobertBarroand
XavierSalaiMartin,orDaronAcemogluandJamesRobinson)showsthatreaching
developmentisnotrelatedtotheapparentobstaclesjustmentioned.Instead,development
isaconsequenceoftheadoptionofwelldesignedinstitutionsandaccuratepublicpolicies,
whichisgoodnewsasbotharevariablesthatremainwithinourrangeofinfluenceand
action.

Inthelast25years,Chilehasrapidlyprogressedonthebasisofeconomicfreedom,
democracy,andruleoflaw.Consensusexistsontheideathatpositiveresultsachievedin
thelast25yearsareduetoasetofinstitutionsandpublicpoliciesintheeconomic,social,
andpoliticalfieldswhichhavestructuredourcountrytowardapathofstabilityand
progress,andthatingeneraltermsChilehasevolvedforthebetter.Threemainissues
sustainthisconsensus.

First,aneconomicmodelwherethemaindriveofeconomicprogressreliesonthe
initiativeandstrengthoftheprivatesector.Therefore,aneconomicsystemthatboosts
entrepreneurship,competitiveness,investment,savings,andinnovationwithlargedegrees
ofeconomicfreedommoderatetaxesaswellasregulation,openbordersforinternational
tradeandastrongcommitmentforresponsibilityonourfiscalandmonetarypolicies.

Second,asocialpolicyfocusedonthemostvulnerablepeople,andwherethepublic
servicesaregenerallyprovidedbybothpublicandprivateagencies,sothatbeneficiaries
canhavethefreedomtochooseamongdifferentcompetingalternatives.

Third,arepresentativedemocracy.Since1990,oneofthecentralfeaturesofthis
democracyisitselectoralsystemthepresidential,parliamentary,andmunicipallevels
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thathasfosteredtheconformationoftwomainpoliticalconglomerates,whichinbroad
terms,havetendedtomoderation,providingimportantdegreesofinstitutionalstability.

Wellknownachievementssupportthisperspective.Forexample,between1944and1960,
incomeperpersonincreasedatanaveragerateof1.8percentannuallybetween1984and
1997itreached5.4percentannually.In1980,Chilehadtheseventhhighestpercapita
incomeinLatinAmericatodayithasthehighestoftheregion.

Certainly,thisdidnotbenefitonlyafew.Whenthefirstnationalpovertycensuswasdone
in1986theSurveyofNationalSocioeconomicCharacterization(CASEN)45percent
ofthepopulationlivedinpoverty.By2006,thisfigurehaddecreasedto13.7percent,
slightlyincreasingto15percentin2009.However,inthelasttwoyearswewereableto
regainadownwardtrendagain,reaching14.4percentatthelatestmeasurementin2011.

Evenininequality,thesituationislessdramaticthanitappearstobe.Itisimportantto
keepinmindthatChilehasbeen,atleastforacentury,averyunequalcountry.Asit
usuallyoccursininitialphasesoftransitiontoamodelbasedoneconomicfreedom,
between1974and1985,ourlevelsofinequality,measuredbytheGiniindex,rosefrom
0.46to0.61.Sincethen,inequalityhasbeendecreasingslowly,reachingalevelof0.52in
2011,stillundeniablyhigh.Oneofthemostfundamentalfactorsindecreasinginequality
levelshasbeenthereductionofeducationalgaps,mainlyduetotheincreaseinhigher
educationenrollment,whichhasrisenfrom200,000studentsin1985tomorethanone
millionnowadays.

Atthesametime,Chileexperiencedadistinguishedtransitiontodemocracy,characterized
byitspeacefulnessandhighdegreeofcollaborationandconsensus.Thereby,oursystem
ofgovernanceadvancedprogressivelytohigherlevelsofconsolidationandstability.These
advanceshavebroughthigherfreedomforourcitizens,reachinghistoriclevels,toapoint
thatFreedomHousehasgrantedChilethehighestscoresinconstitutionalandcivilrights
since2004,anachievementinLatinAmericamatchedonlybyUruguay.

Withoutdoubt,theseachievementsareechoedinthegeneralwellbeingofChileanpeople.
AlifesatisfactionsurveybytheCentreofPublicStudies(CEP)inthemiddleofstudent
mobilizationsinJuly2011,showedthatwithin16years,thosewhofeltgenerallysatisfied
withtheirlifehadincreasedfrom62percentto77percent.Thisrisingtendencywasalso
confirmedbytheresultsyieldedinthe2012U.N.HumanDevelopmentReportforChile,
where80percentofChileansdeclaredthattheyfeelhappyorveryhappy.Thisreportalso
revealsthatthelevelofhumandevelopmenthasbeensteadilygrowingsince1980,

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reachingapeakscoreof0.805(outof1)in2011,aresultthatputsChileinthefirst
positionamongtheLatinAmericanandCaribbeancountries.

Summingup,thiseconomicanddemocraticmodelhasallowedChiletoprogressatan
unseenpaceinnationalhistory,withpovertydecreasingatanunprecedentedpace,afallin
incomeinequality,astabledemocracy,andasignificantriseingeneralwellbeing.

However,inthesecondhalfofthepastdecadewehadlostthepathduetolackofreforms
andineffectivesocialandeconomicpolicies.DuringthattimeChilelostthepathof
progressandstartedshowingclearsignsoffatigue,mainlyduetoalackofcapacitytolead
thekeyreformsandimprovementsbothinourinstitutionsandpublicpolicies
leadershipthatweallknewthecountryneeded.
TheChileanNap:DeclineinGDPGrowth,Productivity,andJobCreation

Intheeconomicfield,ChileenteredintoaperioddubbedtheChileanNap,characterized
byasubstantialdeclineinGDPgrowthrate,withtheChileaneconomygrowingata
slowerratethanLatinAmericanandglobalgrowthrates.Iffrom1990to1999our
economygrewanaverageof6.4percentannually,from2000to2009thisexpansiononly
reachedanannual4percent,andhasbeendeclining.

Additionally,veryfewjobswerebeingcreated,andanincreasingamountoffamilieswere
forcedtoexperiencetheeffectsofunemployment.Inthemeanwhile,wageswere
practicallystagnant.

Thesituationwasnobetterforinvestmentandproductivity.Ratesofinvestment,acritical
componentforbuildingsolidfoundationsinordertosustainfuturegrowth,were
decreasing.Likewise,productivityratesenteredapersistentdeterioration,showing
increasinglynegativegrowth,reachingatitslowestpointagrowthrateofnegative2.3
percentin2009,accordingtotheChileanMinistryofFinance.

Furthermore,asmentioned,aftermorethan20yearsofsystematicreductionsofpoverty
levelsinoursociety,in2009thistendencywasinterruptedandpovertybeganrisingagain,
whichmeantthatinequalitieswouldremaininChileansociety.

In2010,Chileansocietyreactedandvotedforchange,electingPresidentSebastinPiera
andacenterrightcoalitionforthefirsttimein50years.

NewGovernmentPledgedtoBuildBasisforDevelopmentinthisDecade.Themissionof
thisnewgovernmentwastolaythefoundationsthatwouldallowChiletoreach
developmentbytheendofthisdecade.Thesefoundationsandkeyreformswerebasedon

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valuesandideasofamoderncenterrightcoalition,stronglycenteredonconfidencein
people.Amongthesevaluesare:
Freedomandpersonalresponsibility.Inthecenterrightsector,freedomisunderstoodboth
asagoalinitselfandasameanstoachievingsociallydesirableobjectives.Itisagoalin
itselfbecauseonlythroughfreedomdowetreatpeopleashumanbeingsendowedwith
dignity.Freedomisalsoessentialforhumancreativity,whoseoutcomesarespreadto
othersbyvoluntaryexchangesthatincreaseoverallprosperity,givingpeoplethe
opportunitytoachieveindividualhappiness.
Nevertheless,freedommustbeaccompaniedbypersonalresponsibilityandrespectforthe
freedomofothers,understandingthatwearecitizenswithasetofrights,butalsowitha
setofresponsibilitiestofulfill.
Equalityofopportunities.Thegoalofincreasingandextendingopportunitiesisatthecore
oftheactualgovernmentprogram.Theultimateaspirationisthateveryonecanhavea
reasonableopportunityofpersonalfulfillment,inordertoadvancetowardasocietybased
onmeritocracyandsocialmobility,where,regardlessofsocioeconomicorigins,people
couldgetasfarastheirtalent,effortandfreedecisionscantakethem.
Avigorouscivilsociety.Regardingtheroleofgovernmentandcivilsociety,westrongly
believethatisneitherpossiblenordesirabletohaveastatethatpretendstosolveallofour
problems,sinceevenifitcould,itwouldendupblockingthecreativeenergyofsociety.
Dynamicandinnovativenationsarecharacterizedbythepossibilityfortheircitizensto
createinstitutionstoorganizethemselvestobettermeettheirinnumerableneeds.Those
institutionsarethesoulofsociety,becausebesidestheprolificresultsthatcomewiththe
decentralizedandspontaneoussearchofsolutionstoournumerousproblems,theybuilda
senseofcommunitybasedonfreedom,whichiscertainlyahealthyoutcome.Examplesof
thesecontributionsarethetremendoushelpanddedicationthatpeopleandorganizations
ofthecivilsocietydeliveredinthereconstructionofthecountryafterthe2010earthquake,
theimportantcontributionstodevelopmentofcultureandarts,aswellasincreasing
activityconcerningsocialresponsibilityofprivatecompanies.
Solidandinclusiveinstitutions.Forseveraldecades,variousauthorshavebeenrevealing
thecriticalimportancethatinstitutionsrepresentinthedevelopmentofcountries.Oneof
themistheeconomistDouglasNorth,whoarguesthatsocietiesthatreachdevelopmentare
theoneswithinstitutionsthatmakegenerationofknowledgeandwealthlesscostly.More
recently,economistsDaronAcemogluandJamesRobinsonhighlightthatthekeypointfor
successresidesinhavingsolidandinclusiveinstitutions,whichcanofferclearandstable
rulesofthegame,allowingeveryonetocompeteforthecreationofwealth.

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Bearinginmindtheabove,thegovernmentprogramofPresidentPieraputsclear
emphasisinstrengtheningandimprovingourfundamentalinstitutionsbothpublicand
privateinthreemainareas:thefamily,thecivilsocietyandthestate.Thefamilyand
civilsociety,whichmakeuptheenvironmentinwhichpeopledevelop,aremuch
promotedbythisadministration,understandingthattheyarekeyfactorsforthe
developmentofpeoplestalentsandcreativity,aswellasinthesearchforpersonal
fulfillment.Withreferencetopublicinstitutions,therehasbeenapersistenteffortto
enhanceandrefineourdemocracy,makingitmoreparticipativeandtransparent.Likewise,
substantialinitiativesaretakingplacetomodernizethestate,bydeliveringservicesmore
efficientlyandmakingthemmoreaccessibletoourcitizens.Besides,important
improvementsareinprocessregardingthecountrysdecentralizationanotherkeypoint
foracceleratingourpathtodevelopmentaddressingadministrative,financial,and
politicaldecentralization.

AMajorChallengeontheRoad:TheFebruary2010Earthquake.OnFebruary27,2010,
only12daysbeforethenewgovernmenttookoffice,Chilewashitbythesixthstrongest
earthquakefollowedbyatsunami,inrecordedhistory(8.8ontheRichterscale),withthe
verysignificantlossof526Chileansandthedisappearanceofanother25people,addingto
devastatingconsequencesalongastretchof700kmofourterritory.

ThedisasterstruckanareaofChileextendingbetweentheValparasoandAraucana
regions.Theareaaffectedisinhabitedbyalmost13millionpeople75percentofthe
Chileanpopulation.Theearthquakedamagedmorethan50citiesand900townswithrural
andcoastalcommunities.Morethan222,000homeswereseriouslydamagedordestroyed.
Overfourthousandschoolswerebadlydamaged,whichmeantthatmorethanamillion
youngstudentswereunabletostarttheschoolyear(consideringthatinChiletheschool
yeargoesfromMarchtoDecember).Inaddition,40hospitalsweredamaged,17ofthem
tothepointtheywererenderedunusable,andpublicinfrastructurewasdamagedonnearly
2,500pointsacrossthecountry.Thedevastatingeffectsoftheearthquakeresultedin
estimatedlossesof$30billion,equalto18percentofChilesGDP.

Giventhescaleofthecatastrophe,manypoliticiansofallsectorssuggestedabandoning
thegovernmentsoriginalprogramandtofocusthefouryearpresidentialperiodmainlyon
thereconstruction.Butthegovernmentsdecisionwastoaccomplishboth.President
Pieradidnothesitatetopledgetoreconstructinfouryearstheentireinfrastructure
damagedanddestroyedbytheearthquake,notonlyrepairingthemateriallosses,butalso
designingareconstructionplancloselyfocusedonthehumaninterestsoftheChilean
people.Additionally,despitetheadditionalchallengeitimplied,hedecidedtokeepthe

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governmentprogramunchangedanddevelopitfullyinordertomaketheneededreforms
thatwouldsetthebasisforreachingdevelopmentattheendofthisdecade.

Thereformswereimplementedtoincreaseeconomicgrowthrateto6percentandcreate
onemillionnewjobsbetween2010and2014.DespitethesubstantialdeclineofGDP
growthratesbetween2006and2009,andthedeteriorationoffiscaldisciplinewithhigh
levelsofpublicspending,wehavebeenabletorecoverthecapacityoftheeconomyto
growathighratesandbasedonsolidfoundations.From2010to2012,theaveragegrowth
rateroseto5.7percentannually,thesecondhighestgrowthrateamongOECDcountries.

Thegovernmenthasbeenimplementingasetofactionstoincreasegrowthbyenhancing
economicfreedom:
Fiscaldisciplineandreductionofinheritedbudgetdeficit.Theimportanceofsustaininga
moderateandresponsiblepublicexpenditureinordertoguaranteeasustainableeconomic
growthiswellknown.Inthisway,ifthetreasuryhasmoresavingsthandebts,thecountry
willbebetterpreparedforperiodsofcrisis,andboththestateandtheprivatesectorwould
beabletoobtainloansatlowercosts.Likewise,moderatepublicspendinghelpstocontain
inflation,whichproducessubstantialharmforvulnerablepeopleasitreducesthe
purchasingpoweroftheirsalaries.
Unfortunately,partlybecauseoftheeconomiccrisisthataffectedourcountryandthe
world,especiallyin2009,thepastadministrationsoutcomewasastructuraldeficitof3.1
percent.Wehavebeenableprogressivelytoreducethisdeficitto0.6percenttoday,despite
havingtofinancetheearthquakereconstructionprocessandtheexecutionofimportant
socialreforms.ChilereachedthehighestgrowthrateamongOECDcountriesin2012and
governmentspendingisagainonasustainablepath.
Creatingamillionjobsbetween2010and2014.Undeniably,employmentisoneofthe
mostpowerfultoolsforextendingandexpandingopportunities.Thankstothestrong
growthratesofoureconomyandthepersistentpromotionofentrepreneurship,ithasbeen
possibletocreatemorethan817,000newjobsbetween2010andMarch2013,inlinewith
theachievementoftheambitiousgoalthatPresidentPieraestablishedforhismandate:
creatingamillionnewjobs.Evenmore,highlevelsofemploymentinourcountry
nowadaysarecomplementedbybettersalaries,andamajorityofjobscreatedarebetter
qualityjobs,withcontracts,socialandjobsecurity.
Inflationhasremainedundercontrol.Keepingstablemacroeconomicequilibriumsanda
responsiblemanagementofpublicspendinghashelpedcontrolinflation.From2010to
2012,publicexpendituregrewanannualaverageof4.8percent,substantiallylessthanthe
averagegrowthofGDP,whichreached5.7percent.Thiscontributedtoreachinglevelsof
inflationof3percentin2010,4.4percentin2011,andonly1.5percentin2012.
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Majorlevelsofinvestment.Anothercriticalfactortoassuresustainablegrowthis
investment,bothpublicandprivate.ThehigherthepercentageofGDPintendedfor
infrastructureandmachinery,thestrongerthebasisforfutureeconomicgrowth.Inthis
way,investmentrateswentfromanaverageof21.9percentofGDPbetween2006and
2009toanaverageof24.1percentbetween2010and2011.Thishasbeenpossibledueto
astronggrowthofinvestmentmeasuredasgrossfixedcapitalformationwhichinthis
administrationhasincreasedby16percentannualaverage,morethanthreetimesour
economysgrowth.
Taxreliefforworkers,andsmallandmediumsizedenterprises.Aimingtostimulate
investment,taxbenefitswereapprovedforsmallandmediumsizedenterprises.Anew
lawallowstaxexemptionsforthefirst2,500UF(nearlyUSD$121,000)ofearningsfor
thesecompanies,whenevertheyarereinvested.
TaxcreditforR&Dexpenditures.InordertoenhancethecompetitivecapacityofChilean
companies,ataxincentivewasestablishedforR&Dexpenditures,whichwillallow
companiestouseastaxcreditatotalof35percentoffundsassignedtoR&Dactivities.
ThisnewlawhasdrivenalargeincreaseofinvestmentinR&D.From2008to2012
beforethenewincentivearound$15millionwascertifiedinthefirstfourmonthssince
thenewincentivecameintoeffect,nearly$10millionwascertifiedtwothirdsofthe
totalamountofthelastfouryears.
Microeconomicreformstoincreasecompetitiveness.TheCompetitiveImpulseAgenda
(AgendadeImpulsoCompetitivo)isasetof60microeconomicreformsthatseekto
removebureaucraticandregulatoryobstaclesinordertoincentivizeentrepreneurship,
innovation,freeeconomiccompetition,andtheriseofproductivityintheeconomy.
Currently,51initiativesarealreadyimplementedtherestareinprogress.
Entrepreneurship.Reformstoreduceredtapeandincreaseeconomicfreedomhave
producedaboominnewventures.Weareconsciousofthetremendousrelevancethat
entrepreneurshaveforbuildingacompetitiveandhealthyeconomy.Entrepreneursbring
innovation,creativity,andcompetitiveness.Theyalsobringmoreandbetterjob
opportunities,andanincreasingcompetitionbetweenthemusuallyleadstolowerprices
forgoodsandservices.Inordertopromotetheemergenceofentrepreneurs,wehave
reducedthetimeittakestostartanewcompanyfrom27daystoonlyoneday.

Inconsequence,theseincentives,addedtotheimprovementsintroducedthroughthe
CompetitiveImpulseAgenda,areshowingthedesirableeffects:Thenumberofnew
businesseshasbeenrisingsystematically.Theseeffortsarebeingrecognizedby
internationalorganizations,situatingChileasoneofthebestplacesintheworldtostarta
newbusiness.

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Capitalmarketsandinternationaltrade.Capitalmarketsarealsobeingexaminedinorder
toimproveregulationsandincreaselevelsoffinancialfreedominthesemarkets.
Significantenhancementsarebeingdevelopedinthreeareas:protectionandbetter
informationforconsumers,improvementsoninstitutionalframeworkoffinancialmarkets,
andthemodernizationofthefinancialsystem.

Inthetradearea,newfreetradeagreements(FTAs)andinternationaltradeassociations
havetakenplacewithTurkey,Malaysia,andVietnam.Wearenegotiatingacomprehensive
FTAwithIndia.Inaddition,thePacificAlliance(Peru,Mexico,Colombia,andChile)was
foundedin2012.ItaimstobecomeacommontradeplatformfortheAsiaPacificmarket.
Lastly,theTransPacificPartnership(TPP)iscurrentlybeingnegotiatedamong11
economiesfromAsiaandtheAmericas.Asaresultoftheseopenmarketpolicies,Chile
alreadyhas21FTAswith58countries,whichrepresent70percentoftheworlds
population.Thesenumerousimprovementsthatwereimplementedinordertoenhance
competitivenessandeconomicfreedomareshowingvaluableresults.
ReformstoIncreaseHumanCapitalBasedonFreedomofChoice

Education.Thekeyrolethateducationplaysinthegenerationofopportunitiesiswell
known.WhenPresidentPieratookoffice,educationwastheareawheremostclearlythe
countryhadleftasidefundamentalreforms.Thisresultedinanincreasingandcumulative
frustrationthatendedinthemassivestudentprotestsof2011.Therewerealsostudent
protestsin2006.

Duringthelastdecade,governmentsdidnotenactneedededucationalreformsforbetter
quality,accessto,andfundingofoureducationalsystem,andmanypeoplefelthighlevels
ofcumulativefrustrations,whichledthemtosupportthemassiveprotestsof2006and
2011.

AspectsoftheeducationalmodelinChilehavebeenquestioned,including:
Highereducationasarightandhencetheendofuniversityfees(endoftargetedpolicies).
Oneofthemaindemandsexpressedbystudentleadersin2011wastheideaofmoving
towardtotallyfreehighereducation,whichwouldmeanfundinghighereducationentirely
throughtaxes.Thiswouldbeabadsolutiontotheproblemsofhighereducation:Itisa
highlyunfairpolicysinceitbenefitsmuchmorethewealthysegmentsofsociety,
destroyingthefundamentalprincipleoftargetedpublicspending.Almost25percentof
neededfundswouldendupbeingtransferredtothe10percentofthepopulationwiththe
highestincomes,whichwouldreceivealmostsixtimesmoreinfundsthanthe10percent

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oflowestincome.Likewise,54percentoffundswouldbenefitthe30percentofthe
populationwiththehighestincomes(thehighandmidlevelsocioeconomicgroupsof
society).Inlightofthesefacts,therefore,theproposedpolicyoftotallyfreehigher
educationcomestobeseenasstronglyregressive.
PressuretoendforprofiteducationinChile.Duringtheeducationaldebatein2011some
saiditwastimetoeradicateprivateeducationandmovetowardasinglepubliceducational
system,wherethestateplaystheroleofthesoleproviderofeducation.Webelievethis
wouldbeanenormousmistake,asthesystemwilltendtoevolvetowardsasinglestandard
foreducationthatwouldreducediversityofviewpoints,freedomofchoice,andincentives
forcreativityandinnovation,allofthemimportantelementsofprogress.Ourcenterright
coalitionbelievesfirmlyineducationalfreedom,andinastatethatrecognizesand
promotestherightoftheprivatesectortoprovideeducation,aswellasthefreedomand
responsibilityofparentstochoosetheeducationtheywanttheirchildrentohave.
Demandtoabolishcomplementarycontributionsfromparentstoschools(aserious
restrictiontofreedomofchoiceofparents).Complementarycontributionsfromparentsto
schoolsplayasignificantrolesincetheyaddextrainvolvementintheroleofparentsin
theirchildrenseducation.Asitisacontributionthatcomesfromtheirownincome,itis
usefulinordertogeneratemoreinterestbyparentsaboutthequalitylevelofeducation
providedtotheirchildren.Moreover,abolishingthesecomplementarycontributionswill
producearestrictiontoparentsfreedomofchoicetopayacertainamountofmoneytothe
schooltowhichtheywanttosendtheirchildren.
Fundinginstitutionsversusfundingstudents.Financingstudentsthroughstatefunded
vouchershasthesignificantbenefitofpromotingcompetitionamonginstitutionsto
providebettereducation,sincethemorestudentstheyrecruit,themorefundingthestate
providesthroughthevouchers.

Thegovernmentagendahasretainedthestrengthsofoureducationalmodel:freedomof
choice,publicandprivateprovisionofeducation,andasubsidiaryroleofthestate.For
preschoolandelementaryschool:
Morefundsperstudent:extensionandexpansionofvouchers.Improvingqualityand
equityineducationisfarfrombeingjustamoneybasedproblem.However,increasingthe
amountoffundsthatmunicipalandprivateschoolsreceiveforeachoneoftheirstudentsis
essential,whenthefundsareaccompaniedbytheappropriatepublicpoliciesand
initiatives,suchastheonesaddressedbelow.

Itisworthnotingthatthegovernmentpledgedtodoubletheamountofmoneyofthe
schoolvoucherswithineightyears.

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Wehaveincreasedpreferentialsubsidiesby21percent,directedtoallthestudentsof
middleandhighschoolthatbelongtothe40percentmostvulnerableofoursociety.
Additionally,forstudentsinfifthandsixthgrades,thepreferentialsubsidywasincreased
by50percent,anincreasethatwentevenfurtherforstudentsinseventhandeighthgrades,
reachingariseof100percent.
Newinstitutionsforensuringquality.Otherprioritiesaretopromotequality,transparency,
andinformationthroughnewinstitutions:aQualityAssuranceAgencyandanEducation
Superintendency.Theseinstitutionsaimtoensurehighstandardsofqualitybyschools,as
wellastoguaranteeagooduseofpublicresources,conditioningaportionofthesubsidies
andfundingonthesuccessfulattainmentofbasicstandardsofqualityandoperationto
bemonitoredrigorouslybythenewEducationSuperintendent.
Newpolicieswereintroducedtoimproveteacherscareersbyintroducingflexibility,
higherstandards,andincentives.In2011,weenactedtheQualityandEqualityin
EducationLawtomakeimprovementsandaddflexibilitytotheteachingprofessionand
strengthentheleadershipofourschoolteachers,alongwithbetterrewardingthecontinuous
responsibilityofbeingagoodteacher.Additionally,thislawintroducedflexibilityand
incentivesforteachingcareersforthefirsttime,directorshadtheauthoritytoremovethe
lowestfivepercentoftheworstperformingteachers.
Improvementsintheclassroom:newqualitystandardsforteachersandVocationGrantfor
studentsofpedagogy.WesenttoCongressalawthatcreatesanewprogramofQuality
StandardsforTeachers(CarreraDocente),whichincludesnewcriteriaforevaluating
andpromotingteachers,aswellassubstantialimprovementstosalariesbasedon
performanceandresultsratherthanyearsofservice,therebyraisingthequalitystandards
expectedfromourteachers.

ThegovernmentalsoimplementedtheTeacherVocationGrant(BecaVocacinde
Profesor),whichgivesafullscholarshipandotherbenefitstostudentsmajoringin
education(Pedagogy)whohavedemonstratedacademicmerit.Thiswillallowthetraining
oftalentedyoungpeopleasteachersatnocosttothem,withthebenefitforoureducation
systemthatwhentheygraduate,theywillgototeachatourmunicipalandprivategrant
schools.Reformsintertiaryeducationgaveprioritytofinancialsupportforstudentsand
notforinstitutions.
Newscholarshipsandloans.Inhighereducation,wehaveimplementednewscholarships
andaloansystemthatprovidesequalamountsoffinancialsupportforstudentsfrom
traditionalandnontraditionalinstitutions.(Traditionaluniversitiesarethosepublicand
privateuniversitiesthatexistedbeforethe1981reformsthatliberalizedhighereducation.
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Allprivateuniversitiesfoundedafterthatdatearereferredtoasnontraditional.)

Wehavealsofocusedonincreasingsignificantlythenumberofscholarshipsavailable,
fromthe118,000thatexistedin2009to314,000in2013.Thesescholarshipsarereserved
forstudentsfromfamiliesinthe60percentofthepopulationwiththelowestincome.In
addition,theminimumscorerequiredfortheapplicationtestswasreducedforthose
studentsthatcomefromthe40percentoflowestincome.Wewillcontinueraisingthe
numberofscholarshipstomeetourtargetof400,000scholarshipsbytheendofourterm
ingovernment,whichrepresentsanincreaseofmorethanthreetimessince2009.

Thegovernmenthasledamajorreforminthestudentloansystem,extendingcoverageof
loansandequalizingfinancialsupportforstudentsfromtraditionalandnontraditional
institutions.

TheseimprovementsmeanthateveryyoungpersoninChile,withtheexceptionofthe
wealthiest10percent,willbeeligibleforstudentloans.Topreventtheseloansfrom
becomingaburdenforstudents,thenewsystemsubsidizesloanstoreduceinterestratesto
only2percentperyear,whichisonethirdoftheformerinterestrate.Thiswillreduce
monthlyrepaymentsbyalmostonehalfand,onceastudentstartsworking,required
repaymentswillneverbemorethan10percentofhisorherearnings.Additionally,there
willbeamaximumof180monthlyinstallmentsand,afterthisperiod,anyremainingdebt
willbeautomaticallywrittenoff.
Poverty

Reformstoreducepovertyarebasedonvaluessuchasautonomy,responsibility,and
dignity.Thegoalistomoveawayfromawelfarestatetowardpromotionalpolicies,
meaningthosepoliciesthatcanhelppeopleovercomevulnerabilityandpovertyby
themselves(e.g.,bypromotinganentrepreneurialsociety).Theforegoingisbasedonthe
ideathattheprideofanationcannotrelysimplyonhavingasocialprotectionnetwork
rather,itmustbebasedontheideathatthisassistancenetworkshouldbecutdowntothe
minimum:fewerpeopledependentongovernmentfortheshortestpossibletime.Itis
certainlyreassuringtoknowthatthosewhopassthroughthemisfortunesoflifewontbe
abandonedhowever,itisevenmorereassuringthatsocialprotectionnetworksdontgetto
actasanobstacle,butratherasaspringboardthatencouragesprogressbymeansof
personaleffortandcapacities,thankstotimelyandwelldesignedassistancefromthestate.

Anexampleofthisisthenewsocialpolicydesignedbythisgovernment:theEthical
FamilyIncome(IngresoticoFamiliar),aninstrumentthatplaysakeyroleinthe
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commitmenttoeradicateextremepovertyby2014.Thisisaninnovativeconditionalcash
transferprogram,aimedatfamiliesinextremepoverty,basedonthreepillars:dignity,
duties,andachievements.Eachofthesepillarsisaccompaniedbymonetarytransfers,
basedonboththepovertylevelofthefamiliesandontheirfulfillmentofcertainduties,
goals,andachievementsinareasofeducation,health,andjobsearch.Theobjectiveofthis
programistwofold:

Ontheonehand,itseekstosupplementincomesforthosefamilieslivinginextreme
poverty,givingthemaccesstoaminimumlevelofqualityoflife.Thesetransfersentaila
basetransferandfurthertransfersconditionedtothefulfillmentofdutiesand
achievementsineducationandhealth,suchashealthcliniccheckupsforchildren,school
attendance,graduationfromhighschoolforadults,andformalizationofemployment.
Theseconditionaltransfers,aswellassupplementingtheincomesoffamilieslivingin
extremepoverty,seektoattackthelongtermcausesofthiscondition,generating
incentivessothatpeoplecanthemselvesovercometheirdifficultcircumstances.

Thefocusofthesetransfersisdirectedtofamilieslivinginextremepovertybelowthe
destitutionlineandwillreach170,000homes(640,000people).

Ontheotherhand,intheachievementspillar,theprogramincludestheFemale
EmploymentBonus(BonoalTrabajodelaMujer),whichallowsfamiliestoovercome
povertyinanindependentandpermanentwayintheshortandmediumterm.Inthisway,it
recognizesthefactthatworkisthemosteffectiveandsustainablewaytoovercome
poverty,especiallyinthecaseoffemaleledvulnerablehouseholds,whohavelower
participationintheworkforce.

Thefocusofthissubsidyhasgreatercoverage,reachingwomenbetweentheagesof25
and60whobelongtothe30percentmostvulnerablehouseholds,andwillbeextended
graduallytoreach40percentofthepopulationby2015.Thiswillbenefitbetween300,000
and400,000womenperyear,increasingtheirsalariesby20percent,whichinpractice
impliesthattheminimumwageforwomenreceivingthisbenefitwillbe$227,000Chilean
pesospermonth(approximately$471).Thepursuitoftargetedandeffectivesocial
policies,accompaniedbyarobustincreaseinemploymentandsalaries,hasallowed
povertyratestofallonceagain.
ReconstructionPlan:FreedomofChoiceandDignityofBeneficiaries

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PresidentPierapresentedtheReconstructionPlansixmonthsafterthenaturaldisasterof
February27,2010,inthecityofConcepcin.Thefouryearplandetailedthespecific
objectivesandactionsforrebuildingtheearthquakedamagedinfrastructureandensuring
thatChilewouldbeinastrongerpositiontofaceanyfutureadversities.The
ReconstructionPlanhasfocusedonaddressingthehumancostsofthedisaster,helping
victimsandrespectingtheirdignity,ratherthansimplyrecoveringmaterialgoods.Costs
anddeadlineswouldhavebeenmuchmoreeasilymetwiththeconstructionofuniform
housingonemptylots.

Withintheplan,guidingprincipleswereestablishedforeachareaofreconstruction.These
principlesrelatetotheprovisionofsupporttothosemostaffected:respectforthedignity
andfreedomofchoiceofthefamilieswhoweregiventheopportunitytorebuildtheir
homesontheiroriginalsiteandtheirinvolvementintheprocessreestablishing
infrastructuretoallowproductioninChiletocontinueatfullcapacitythepreservationof
theheritageofChilesoriginalpeopleandtownstakingtheopportunityofthe
reconstructiontoimproveinfrastructureintheaffectedareas,andensuringthatthe
reconstructionprocesswouldhavestrongmoralandsocialcomponentsinadditiontothe
rebuildingofinfrastructure.

PresidentPierasetoutaroadmapthatwouldenablethecountrytoovercomethedisaster
andemergefromitstrengthenedthroughaninclusiveplanofpublic,private,andcitizen
support,wheretheroleofcivilsocietyandtheprivatesectorhasbeenverysignificant
fromthebeginningoftheemergency.

Infact,organizationsofcivilsocietymadegreatcontributionstoprovidingassistanceto
victims,buildingemergencyhouses,repairingschools,amongmanyotherinitiatives.
Additionally,thegovernmentpassedabillin2010toencourageprivatecontributions.

Afterthreeyears,ournationcanfeelproudthatmorethan87percentofwhatwas
destroyedordamagedintheearthquakeisnowrebuiltorrepaired.Inthemostsignificant
andsensiblearea,thereconstructionofhousestofamilieswholosttheirhomes,morethan
215,000ofatotalof222,000houseshavebeeneitherrepairedorrebuilt,orarewellalong
intheprocessofreconstruction.
ReformstoImproveInstitutionsandModernizetheState

ImprovingOurDemocracybyIncreasedParticipationandTransferringPowertoCitizens.
Duringthelast25years,ourcountryhasexperiencedacontinuousreductionofpeople
registeredintheelectoralsystem.Between1988and2009,thepopulationwiththerightto
voteincreasedby4million,whilepeopleregisteredtovoteroseonlyby850,000,whichis

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mainlyexplainedbytheverylimitednumberofyoungpeople(18to29)whoenrolledin
theelectoralregisters.Inordertoadvancetowardsmorevitalityforourdemocracy,the
governmentpromotedtwokeyimprovements.

In2011,weapprovedautomaticregistrationandvoluntaryvoting.Thisinitiativeallowed
ustoaddmorethan5millionpeopletotheelectoralroll,andforthefirsttimeinour
historyeveryChileancitizenwiththerighttovotewouldbeincludedintheelectoral
registers.Withthisreform,thepresenceofpeopleaged18to29increasedmorethanfive
timesintheelectoralroll.

Additionally,automaticregistrationandvoluntaryvotingisintunewiththenotionof
personalfreedomandresponsibilityforourownacts,ideaspromotedbyoursector.We
haveremoveddisincentivesforafreeapproachtopoliticsandpotentialsourcesof
resentmentanddistancetowardit,byremovingobstaclesforelectoralparticipationand,
moreimportant,lettingpeopledecidetoparticipateoneachelectoralprocess.Besides,this
changewillforcepoliticalleaderstomakebiggereffortsforofferingattractiveproposals,
capableofmobilizingthesupportofChileancitizens.

In2012,weapprovedalawthatintroducedprimaryelectionsintothedemocraticsystem.
Internationalexperiencehasdemonstratedthatintroducingprimaryelectionsgeneratesin
citizensmoreconfidenceandinterestinpolitics,sincethevoterisnolongerlimitedtoa
choicebetweencandidatespreselectedbypoliticalparties,becausenowthevoterhasthe
possibilitytogetactivelyinvolvedintheprocessesbywhichpoliticalpartieschoosetheir
candidates.Thisway,asystemofprimaryelectionsestablishedbylawincreasescitizens
freedomtochoosetheirrepresentatives,andencourageshigherlevelsofcompetitiveness
onnominationsfortheelectionofrepresentativeauthorities.

Moreover,thegovernmentispromotingasubstantiallegislativeagendatowardhigher
levelsoftransparencyandintegrity.Oursignificantadvancesintransparencyand
providingpublicinformationarereflectedinourpositiveevolutionregardingperception
ofcorruption.

Chilescenterrightcoalitionhasadeepconvictionofthestatesroleinthedevelopment
andwellbeingofsociety.Wearesupportersofastatethatrespectsandensureslife,
freedom,andotherfundamentalhumanrightsastatethatfosterswidespaceforcreativity,
entrepreneurship,anddynamismofindividualsaswellasfrominstitutionsofcivilsociety,
thatarethemainsourceofinnovation,development,andprosperity.Thiscoalitionalso
stronglybelievesandactstobuildatransparentandefficientstate,inservicetocitizens

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andsubjecttotheircontrolastatethatmakesgooduseofeverycollectedcentandthat,in
short,doesmoreusingless.

Amongthekeyissuesforgettingthepublicadministrationtooperatebetterandmore
efficiently,istoprovideitwithappropriateinstancesofcoordination,sothattheefforts
canfocuseffectivelyontheaccomplishmentoftheobjectivessetonthegovernment
program,withoutduplicationsoruselessactions,andwithrigoroussystemsofevaluation
andcontrol.ExampleoftheaboveisthecreationbythisadministrationofaDeliveryUnit,
whosepurposeistomonitorthefulfillmentofpredefinedspecificgoalsandperformance
indicators.Inadditionandinordertosimplifyprocessesofcoordination,interministerial
coordinationcommitteeswerereducedtofourmainareas:(1)political,(2)economic
development,(3)socialdevelopment,and(4)infrastructure,territory,andurbanism.

Additionally,withtheaimofintroducingoperationalefficienciesinpublicadministration,
aswellaschangingthewayitrelateswithitscitizens,throughoutamorecitizenoriented
administration,importantinitiativesaretakingplace.

ThemainoneisChileAtiende,amultichannelintegratedprogramthatallowspeopleto
getanyprovidedservicefromthestateinaonestoppublicoffice(eitherfacetofaceor
online),withtheconsequentsavingsintimeandmoneyforusers.Atpresent,Chile
Atiendeoperateswith187publicofficesaroundthecountry,providingaccesstomorethan
70percentofthecountryspopulation.Already23differentpublicinstitutionshavejoined
theprogram,givingthechancetoaccessmorethan150publicservicesinjustoneplace.
Besides,wehaveimplementedtheprogramChilesinpapeleo(Chilewithoutredtape),
whichintendstoincreasedrasticallythenumberofpublicdocumentsthatcanbe
completedonline.Atthetimethisprogramwaslaunched,inAugust2012,thiswas
possibleonlyfor25percentofthelonglistofdifferenttypesofpaperworkcitizenscan
obtainfromthestatethegoalistoincreasethatamountto60percentbytheendof2013.

Conclusions

Itiswellknownthatduringthelast25yearsChilehashadpositiveresultsonitspathof
progress.Keyfactorswerethedevelopmentofaneconomicmodelwhereprogressisled
bythestrengthoftheprivatesector,asocialpolicyfocusedonthemostvulnerablepeople,
andthepossibilitytodevelopastableandrepresentativedemocraticsystem.

Inthesecondhalfofthepastdecade,however,welostourwaymainlyduetothe
implementationofineffectivesocialandeconomicpolicies,andtothelackofcapacityto
leadthekeyreformsandimprovementsbothinourinstitutionsandpublicpoliciesthat

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weallknowthecountryneeded.Chileansreactedandvotedforachange,electing
PresidentPieraandacenterrightcoalitionforthefirsttimein50years.

PresidentPieraandhisgovernmentpledgedtobuildthebasistoreachdevelopmentin
thisdecade,despitethefactthatthecountrysufferedthesixthmostdevastatingearthquake
inrecordedhistory.Thismajorandnobletaskadvancesatacceleratedpaceduetothe
implementation,first,ofkeyeconomicreformsthathaveallowedthecountrytoregainits
capacitytogrow,generateopportunitiesthroughjobcreation,andstimulate
entrepreneurshipsecond,drivingthemostambitiouseducationalreformofthelast30
yearsthird,puttingintopracticeaninnovativesocialpolicywherepublicassistance
providesincentivesforpersonalresponsibilityand,finally,makingafullcommitmentto
dealwiththeextrachallengeofreconstructingthedamagesandlossesmadebythe
earthquakeof2010.

Butthesignificanceofthiscenterrightcoalitionadministrationgoesevenfurther:Itmarks
theendofalongprocessofdemocraticconsolidation,demonstratingthatacenterright
coalitionisabletogovernefficiently,andatthesametimeimprovedemocracy,promote
highlevelsoftolerance,andworkwithadeepsocialfocus.

Theexistenceofthisgovernmenthasenabledtheemergenceofamoderncenterright
coalitionforChile.Acoalitionthatbelievesstronglyinpeople,andvaluesfreedomand
personalresponsibilityastwosidesofthesamecoin.Acoalitionthatunderstandsthatin
ordertogivepeoplethefreedomtochoose,asocietymustmaintainhealthylevelsof
transparencyandcompetitivenessbothineconomicsandinpoliticsprovidebasic
securitiesthatcanallowtakingadvantageofopportunitiesandtheenjoymentoffreedom
andreducetheexcessivesocioeconomicinequalitieswithoutsacrificingtheeconomic
growthneededtoprovidesocietytheopportunityofreachingfulldevelopment.
CristinLarrouletisChilesministerofthePresidency,theprimaryadvisortothe
president,SebastinPiera.In1990,Mr.LarrouletcofoundedLibertadyDesarrollo,the
mostprominentfreemarketthinktankinChileandacoalitionpartnerofTheHeritage
Foundation.

Authors
Cristi&#225nLarroulet

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