Chile’s President Lagos Struggles to Finish Term

President Ricardo Lagos of Chile
Beleaguered Chilean President Ricardo Lagos (Photo: Antti Aimo-Koivisto/AFP)

Little more than a decade after the agonizing end of Chile's 17-year military dictatorship under Gen. Augusto Pinochet, the civilians who replaced him are wondering if they will manage to finish their current term of office.

No one is suggesting that the armed forces will again intervene or attempt to seize power. But the center-left coalition that has governed Chile since the 1990 transition to democracy is crawling to an ignominious end, assailed by debilitating corruption scandals and an increasingly skeptical public.

Waiting patiently in the wings to pick up the pieces are Chile's conservative parties, inheritors of the Pinochet legacy, many of whose top leaders served in government during the dictatorship. Despite considerable popular resistance to letting them back into La Moneda—the seat of government bombed and partially destroyed in the 1973 coup d'etat against the last socialist president, Salvador Allende—the right-wing alliance is poised to post large gains in next year's municipal and legislative elections and sweep to the presidency in 2005.

The demise of the civilian democrats’ high hopes is a tale of permanently reduced expectations, pervasive cynicism, and poor leadership. Chile was once a highly politicized society with vibrant political parties representing a range of social classes and ideologies. Today, young adults rarely even register to vote. Party figures are thoroughly discredited, and poorer sectors of the population are increasingly drawn to the pinochetista alliance, which has concentrated on providing good city services and competent local management.

The conservative Alliance for Chile swept to power in dozens of local governments in 2002, the culmination of two decades of work patiently building up their grassroots base. Meanwhile, the socialist and centrist parties, comfortably installed in the corridors of power, have an ever dwindling presence at the local level.

Chile's Democratic Concertation, a four-party coalition that was formed from the anti-Pinochet forces in the late 1980s (minus the Communist Party, which was not invited to join), was expected to lose support gradually after its third straight election victory in 2000. But in addition to the natural deterioration in support common to incumbents, the Concertation has been hit with devastating corruption accusations in recent months.

The worst case is a massive kickback scheme uncovered in the Public Works Ministry involving millions of dollars in artificially inflated contracts. Prosecutors discovered that a large portion of the overcharges was skimmed off and returned to government officials. A host of officials and contractors now face charges. Among them is former Minister of Public Works Carlos Cruz, who was jailed for 30 days, and is currently out on jail, pending his trial.

President Ricardo Lagos himself headed the Public Works Ministry during the 1990s. Although he has not been accused of any crime, the association is not lost on Chile’s citizens. Lagos will be questioned about some of the dubious contracts by the investigating judge.

A host of other minor influence-peddling accusations also plague the governing coalition. In addition, a complex fraud scheme involving government deposits was uncovered accidentally in February, when Central Bank President Carlos Massad’s secretary was caught sending sensitive financial information to an accomplice in a major investment company, giving the impression that local bond and exchange markets were rigged.

Instead of moving quickly to put out the blaze, government officials dawdled and allowed the company to seize millions in government deposits and move them out of the country. Tentative losses to the state treasury are estimated at nearly US$100 million, and the scandal briefly threatened to undermine local capital markets. Massad was forced to resign from the Central Bank on April 1 for negligence.

President Lagos' son-in-law Gonzalo Rivas, head of the quasi-government organism which was looted by market manipulators, also quit, although he was not accused of complicity in the scheme.

As a result of the scam, several mutual funds suffered sharp drops in their value. Aside from the appearance of neglect and incompetence, many small investors lost considerable sums in the brief panic that followed the revelations, and mutual funds have not yet recovered investor confidence.

As the dust settled, observers and politicians began to ask aloud how many more blows the Lagos administration could sustain before being forced out. Popular support for the Concertation has been waning for years as the economy struggles unsuccessfully to recover from a 1999 recession. Growth was just over 2 percent in 2002, not enough to overcome persistently high unemployment rates. Meanwhile, the country´s unfairly skewered income distribution has steadily worsened since the mid-1970s.

Despite its socialist label, the coalition government has stuck faithfully to the conservative, free-market economic model first imposed during Pinochet´s iron rule. Although critics charge that the model is running out of steam and call for experimentation, the Concertation is unwilling—and now unable—to challenge monetarist orthodoxy.

In an attempt to shore up support, Lagos showed unexpected independence in dealing with the United States over the Iraq war. Chile holds a seat on the United Nations Security Council and wielded a potentially crucial vote for the controversial follow-up resolution authorizing an attack on Saddam Hussein´s regime. It was widely expected that Lagos would fall into line behind Bush. But Chile announced it would vote “no” on a resolution authorizing force against Iraq, perhaps because polls indicate that 90 percent of Chileans oppose the war. That announcement may cost Lagos dearly in his future relations with the U.S. government.

Chile and the United States signed a free-trade agreement in 2002 which now must be ratified by the two countries' legislatures. Congressional anger at countries that did not back the war may threaten approval in Washington.

Meanwhile, Lagos' room to maneuver domestically is much reduced, and his early lame-duck status makes it increasingly difficult for him to keep his fractious coalition in line. Lagos must often turn to the pinochetista parties for support in order to win key votes.

Not much is left of the bright optimism that accompanied the anti-Pinochet forces back into power in 1990 after the frightening years of dictatorship. Although Salvador Allende´s daughter Isabel, a Socialist legislator, was elected president of the Chamber of Deputies at the start of the current congressional session, her presence is an ironic symbol of the dreams of equality that didn´t survive her father’s administration.