Chile: A Schizophrenic Country

October 2, 2013


We Chileans are known around the world for having undertaken an “exemplary democratic transition” and for having made a leap towards “being developed.” We have been told to think that Chile is the most successful country in Latin America, a place where if people are not thriving, it is due to their own personal shortcomings. International financial institutions, the oligarchic media, and our own government leaders have promoted us as the successful neoliberal showcase.

1998Photo by Brittany Peterson

The repressive environment of the Pinochet dictatorship was ideal for the imposition of the neoliberal experiment by force since nobody could oppose it and hope to survive long enough to explain why it should be contested. Ironically, the “democratic transition” was the mechanism chosen to cement it into place. Not only did we prove to be outstandingly gifted when adopting the model, we went so far as to teach it to other unwary countries that wanted to be just like we were supposed to be.

We currently have a president who, according to Forbes, owns one of the greatest fortunes in the world. When he travels, he dares to enlighten world leaders such as Angela Merkel, suggesting that she “do it the Chilean way.” As a reward for our good macroeconomic behavior, we have become the first South American country to be admitted into the Organization for Economic Co-operation and Development (OECD), the club of the “developed” countries. Among its 34 members, we achieved the highest gross domestic product (GDP) growth in 2012 and 2013 (which is, it should be noted, no great accomplishment since the United States and Europe remained in recession). The World Bank has promoted us from “high-middle income” status to that of a “high income” country. Even the United Nations Development Program (UNDP) gave us its highest rating in terms of Human Development in Latin America. Now that we are a “developed country,” what more is there to ask for?

And yet the reality suggests that Chile is not a model that should be replicated because it is neither democratic nor developed. It is an unjust country where citizens have been transformed into consumers, and whose rights now depend on their relative purchasing power. It is a country of workers who have been pushed into consumerism and individualism, overwhelmed and indebted, so they can better fill this new role assigned to them. The World Bank, using a questionable measure to account for differences in purchasing power, calculates Chile’s per capita wealth at US$21,590, almost 900 thousand Chilean pesos a month. But this means nothing to more than 17.5% of salaried workers who, according to 2011 national survey (Encuesta CASEN), receive only a minimum salary (193,000 pesos), and much less to the 6.4% who receive below that. It means nothing to 90% of the population at the lowest income levels. They do not benefit from cheap consumer items because they can only afford to purchase the bare minimum. The irony is that an economy that produces cheap consumer items to benefit its consumers is based on the miserable salaries of those who, in the end, cannot afford them.

Chile is not a democratic country because it is governed by an illegitimate, immoral constitution that has been repudiated by all truly democratic sectors. It was imposed in 1980 after a referendum carried out under a state of siege, without any means of registering voters, and in a context of repression emblematic of the dictatorship. The perpetuity of this constitution was so important to Pinochet that its acceptance as legitimate formed a central part of the conditions he imposed for the transition that took place after his loss in the plebiscite of 1988. As Felipe Portales argues in Chile: Una democracia tutelada, the Concertación agreed to this condition behind the backs of the Chilean people.

In rapid fashion, those who managed this “transition to the extent possible” also became ardent followers of neoliberalism, even though several of them had personally suffered at the hands of the dictatorship. Edgardo Boeninger, one of the Concertación’s main ideologues and a minister during the first civilian government after Pinochet’s departure, later affirmed that the coalition’s leadership had no intention of complying with many of its campaign promises.1 Preserving the status quo during the transition allowed the Concertación to become not only the clase política, Chile’s most important political actor, but also the clase dominante, an economically powerful class, thanks to the revolving door between the public sector and big business aligned with imperialism. By subordinating their political obligations to the interests of big capital and their “big brother” to the north while at the same time preserving their own interests, they betrayed the Chilean people who had placed their hopes on them. It therefore comes as no surprise that Concertación leader Ricardo Lagos (president from 2000-2006 and a member of the Socialist Party), was considered by the business community to be “the best right-wing president of all times.”2

We are the only country among the dictatorships of Latin America’s Southern Cone in which civilian supporters of military rule managed to recycle themselves into a majority party following the return to “democracy,” as was shown with the 2010 election of Sebastián Piñera. They are strongly represented in Congress, occupy high state-level positions, and dominate the private sector. Even though the constitution stipulates regular election cycles, these are carried out under the framework of a “binomial” system. Under this arrangement, both houses of Congress are elected in two-member constituencies with the coalition that comes second needing only a third of the vote to secure the second seat. This process was created to insure that the 35-40% of the population that continued to support the outgoing dictatorship would be systematically over-represented in Congress. Because post-dictatorship parties could only win if they formed coalitions, the set-up also guaranteed that the two main neoliberal coalitions” (the Concertación and what was previously known as the “Alliance” and is now called the “Coalition for Change”) would alternate in power. This system has also enabled pinochetistas, even when in the minority, to effectively block any grass roots initiative towards democratization that could emerge from the organized efforts of NGOs or human rights groups. A new system of “minority veto democracy” has taken root in Chile.

According to the rules of the transition set out in the 1980 Constitution, and following a series of amendments passed by referendum in 1989, the Constitution and an important set of Organic Constitutional Laws (LOCs) can only be amended by supermajority thresholds in Congress. Equally undemocratic is the veto power still held by a Constitutional Tribunal made up of ten designated jurists who, consequently, have considerably more power than any elected representative. What we have is a constitution intentionally designed to govern the fate of Chileans in perpetuity and, as such, in flagrant breach of international guarantees of the right to popular self-determination. Furthermore, whenever there has been the slightest window of opportunity for attaining the quorums demanded for meaningful change, the Concertación has deliberately opted not to take advantage of them.3




A country cannot be considered democratic if its distribution of resources is as abysmally unbalanced as in Chile, which ranks as the most unequal of all countries with comparable data in terms of income distribution. And that doesn’t even take into account the fact that the surveys Chile has used in recent years to measure socioeconomic data (including the CASEN survey) have been shown to underestimate significantly real income concentration.4 Once capital gains are properly included, as was done in a study recently completed by a group of economists from the University of Chile’s Faculty of Business and Economics, we find that the level of inequality in the Chilean economy surges. The Gini coefficient—the standard measure of income inequality—increased by 6 points, from 0.55 to 0.63, confirming that in Chile income distribution is the most unbalanced in the world among those countries where comparable data is available.5

Research by these same economists confirmed that the imbalance rests primarily with the ultra-rich, the wealthiest 1% and especially the wealthiest 0.1% and 0.01%. “…[E]ven when estimating the income of the super-rich conservatively,” the economists write, “their participation in total national personal income is extraordinarily high… over 30% for the wealthiest 1%, 17% for the wealthiest 0.1%, and more than 10% for the wealthiest 0.01% as an average during the 2004-2010 period.”6 At each of these income levels, Chilean data show a greater upper-end concentration of income than in any country to which it can be compared. For example, those in the top 0.01% of wealth receive, on average, four times more than a comparable group in six sample countries.

Income inequality in Chile is partially determined by the fact that wages are more heavily taxed than capital. To cite just one example: Businesses acquired after 2001 are not subject to any capital gains tax, and taxes on business-generated revenues are credited towards the owners or shareholders’ income tax payments. Since individual income tax rates are more than double those of businesses, the system promotes the minimum possible distribution of dividends or revenues so as to avoid individual income taxes while increasing the market value of the business at the same time. Shareholders thus benefit with higher capital gains that, as we know, are untaxed. And, to make matters worse, we are well aware that only the wealthiest sectors have the ability to evade taxes by providing false information or by using tax shelters or tax havens. Those whose income derives primarily from wages are left paying the tax bill.




From the beginning of the dictatorship and continuing to the present, Chile’s leaders have abandoned any long-term, endogenous, sovereign development strategy in favor of one based on the interests of transnational capital. In the process, they have favored sectors with comparative advantages in world markets, fundamentally those in predatory sectors such as mining, forestry, and fisheries. So it is that growth in Chile is not synonymous with development since it is based on the extraction and exportation of non-renewable resources, mainly non-refined copper, which produces practically no forward linkages. Chilean Industries that used to process raw materials, particularly in the copper sector, have been dismantled, as have the lives of their workers, and replaced by imports brought in thanks to the numerous free trade treaties that Chile signed during the period of “democratic rule.”

The Gross Domestic Product (GDP) in Chile is 12% higher than Gross National Product (GNP). Remittances sent abroad by transnational companies, mainly as revenues from investments in copper, account in large part for this difference. Revenues have been draining out of the country since 1981 when the dictatorship gave new copper mines to foreign companies at no cost, even though the action contravened its own newly written constitution. “Chile’s salary,” as Allende called the copper industry, no longer makes Chileans wealthy but is instead funneled to transnational corporations. We are the only country in the world that has, essentially, ceded its subsoil rights to private, mostly foreign, investors. We did so by way of a 1981 Organic Constitutional Law (LOC) known as the Concesión Plena (“full concession”). This directive, which as a LOC can only be overturned by a congressional supermajority, gave the new owner rights to the property in perpetuity and irrevocably in return for…nothing, no payment. The new owner, for his part, can sell, rent, cede, mortgage, or do as he will with the property. And, if in the future Chile should have the temerity to take over the property, the government will be obliged by law to pay the owner the original value of the mine, the value of all investments made in it, and the future value of the property. The architect of this neoliberal “innovation” was the same person who privatized the pension system and created the Labor Code that undercut the organized workers: José Piñera, a former minister during the Dictatorship and brother of the current president.

Economic growth, particularly that generated by high copper prices, has not resulted in an overall increase of wages as a percentage of GDP. In fact, just the opposite has occurred. This means that the growth that has occurred has benefitted big capital, national and foreign, and not the workers. Had copper resources been kept in our hands, we would not have needed foreign investments to open new mines. We could have invested in copper processing industries, controlled international supply, and been better able over the long run, and not just at the present time, to determine the international price of copper.7

If growth has not produced development in an economic sense, the Chilean economic model has failed as well at the social level. The fact that Chile is about to become the only country in the world with a completely private system of higher education can hardly be called a characteristic of exemplary social development. Rather than being considered as social rights, education, health care, the pension system, and other services needed for social reproduction have been sold to for-profit enterprises, further exacerbating income disparities among Chileans. For over 25 years, the only totally private pension system in the world has operated in Chile. The suffering this caused among the poorest at times of market declines eventually forced the state to subsidize the most meager pensions. In stark contrast, Chile spends more on defense on a per-capita basis and as a percentage of GDP than any other Latin American country.

A state that does not protect the human rights of those excluded from the system cannot be considered either developed or democratic. Nor can a state that robs the Mapuche people of their history and their territory, treating them as internal enemies, repressing and massacring under the auspices of an anti-terrorist law inherited from the dictatorship. No matter how highly the UN Development Program ranks us on their Human Development Index, they have failed to consider either the on-going human rights violations or the glaring economic inequalities that constitute Chile today.

Chileans once again find themselves in the thick of an electoral process in which three alternatives are being debated: 1) We can have more of the same by electing one or another of the two right-wing coalitions; this would mean a prolonged period of “transition.” We have already had a prolonged transition, which we call eternal transition, so having more of the same means more eternal transition, but only towards a “democracy-to-the-extent-possible” future, and a further pursuit of consensus between civilian pinochetistas and a Concertación, which now dresses up as an opposition by calling itself a “New Majority” and offering a “New Model” of governing. 2) We can vote for any of the groups that really do oppose the current system. They will surely lose, but at least this will allow us the opportunity to mark our ballots demanding a Constitutional Assembly. Or 3) we can take part in an electoral boycott based on the principle that so long as the binomial electoral system is in place, voting can’t do anything. The younger generations, for their part, aren’t showing very much interest in electoral politics, or in party politics, but instead have opted for a politics of the street, which they have taken on with strength, courage, and a new systemic vision.

To confuse matters further, all sides now agree on the need for a new constitution, even those who had previously vehemently rejected it. To be sure, for some, the call for a new constitution responds to a deeply felt need to change an undemocratic system; for others, it is simple electoral opportunism. The difference between them can be read in the methods by which they propose to engage in the process. Some argue that the new constitution should be drafted by the illegitimate Congress, elected under the binomial system, or even by a commission of “experts” selected by these same illegitimate leaders. Others—students, part-time workers, the Mapuche, those who have been cheated and systematically excluded from the system—argue that is an issue to be decided by the sovereign people and therefore any new constitution should be drafted by a democratic Constitutional Assembly and ratified through a popular referendum.

The worst outrage to the dignity of the Chilean people is that we continue to be governed by a text crafted by the Pinochet dictatorship. Forty years ago, most of the world understood Chileans to be a politically advanced people who were capable of recognizing in Salvador Allende a visionary leader who could construct a democratic road to socialism. We were a people who saw the Popular Unity period as one in which a dynamically engaged state could lead a process of social and economic transformation designed to benefit the many and to regain Chile’s sovereignty. It was during that time when we saw that free, universal public education, just as the students are demanding today in the streets, is not only possible, but also indispensable for genuine development.

Today, remembrance of our past struggles and an increased awareness of our current situation is crucial if we are to successfully contest a mass media which happily peddles the state’s sugar-coated version of reality. It is crucial for us to be able to separate real change from the kind of “change” we have become so accustomed to, a “change so that nothing changes.” We must put an end to the schizophrenia that divides who we are as a society and who they want us to believe we are. Only by knowing ourselves and by uniting in common purpose can we find the correct road, the wide alamedas that Allende foresaw that will lead to our emancipation.





1. Edgardo Boeninger, Democracia en Chile (Santiago de Chile: Editorial Andrés Bello, 1997).

2. Felipe Portales, “Para major resolver o votar por quien quiera,” El Ciudadano, June 1, 2010,

3. Felipe Portales, “Defección del liderazgo concertacionista, El Mostrador, March 3, 2009,

4. “CEPAL opta por desvincularse de las próximas encuestas CASEN,” CIPER, October 2, 2012,

5. Ramón López, Eugenio Figueroa, and Pablo Gutiérrez, “La ‘Parte del León’: Nuevas estimaciones de la participación de los súper ricos en el ingreso de Chile,” SDT 379 (2013),

6. López, Figueroa and Gutiérrez, “La ‘Parte del León.’”

7. Orlando Caputo and Graciela Galarce, “La nacionalización del cobre realizada por Salvador Allende y la desnacionalización del cobre en dictadura y en los gobiernos de la Concertación,” CEME: Archivo Chile, May 2008,



Ximena de la Barra is a Chilean architect who participated in Salvador Allende’s government. Following her time in exile, she became a Senior Latin-American Policy Advisor for the United Nations. Currently, she is an international consultant who lectures and writes on Latin America. She is the editor of Chile: Neoliberalism’s Fractured Showcase (Haymarket, 2012).



Read the rest of NACLA's Fall 2013 issue: "Chile 40 Years Later: The Politics of Memory and the Memory of Politics"



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