Country Report November 20, 2009, 6:30PM EST

Healing Chile's Malaise

Despite decades of economic growth, average citizens are dissatisfied—and want better schools and more opportunities

http://images.businessweek.com/mz/09/48/600/0948_44chile.jpg

Piñera, a conservative now leading in the polls, plans no radical policy shift Claudio Reyes/EPA/Corbis

By Geri Smith

Browse Issues

Browse the BusinessWeek Archive

Tapia: The young data analyst is "living the American Dream" at Evalueserve Eilon Paz

Story Tools

Santiago - Valeria Garcia has come a long way in the past two decades. As a high school dropout, she lived in a wooden shack with a dirt-floor kitchen and a tin roof in San Ramón, one of the Chilean capital's roughest neighborhoods. But at age 33 she went back to high school and then earned a degree in psychology from a local university. For seven years she commuted an hour each day by bus to classes, all the while taking in washing to make ends meet.

Now 52, Garcia is a psychologist at a center for battered women and is sending her children to college with no government aid. Her $1,200 monthly income disqualifies her for financial assistance, although she still lives in San Ramón, a desolate expanse of makeshift houses and vacant lots. "If I'm now considered middle-class, why do I feel so poor?" she says, looking around the four-room cinderblock house she shares with her three daughters. "The world thinks Chile is successful, but many Chileans can't do much more than work, sleep, and eat. People aren't satisfied."

Chile has come a long way since 1990, when democracy was restored after 17 years of military rule. The economy has been one of the world's fastest-growing, inflation is a distant memory, the poverty level has fallen to 13% from 45%, and per capita gross domestic product has quadrupled, to $10,100.

Yet like Garcia, many Chileans feel a certain malaise. They know their country is one of the most prosperous in Latin America due to fiscal discipline and the profound free-market reforms of the past 30 years. But Chile's explosive, Asian-style growth of the 1990s has given way to expansion averaging just 3.5% annually this decade. And despite efforts to diversify, volatile copper earnings continue to account for more than half of total exports. So Chile's leaders are seeking to reduce that dependence and nurture a knowledge-based economy via better schooling and more innovation.

For the well-to-do, it's business—and pleasure—as usual. Glittering new office towers and luxury apartment complexes abound in Santiago's wealthy neighborhoods, and on Sundays well-heeled families flock to the Club de Polo San Cristóbal for a sumptuous buffet of prime rib and king crab. They dine overlooking immaculate fields where thoroughbreds are groomed for afternoon races. But in the sprawling, dusty communities where Chile's nascent middle class lives, health clinics, parks, and public transportation are in short supply. In spite of its progress, Chile remains a class-bound society of haves and have-nots. "Chileans have advanced, but not as much as they'd like, and those who feel left behind are bitter," says Marta Lagos, an economist who heads Latinobarómetro, an opinion research firm.

MORE DYNAMIC

That's translating into trouble for the Concertación, the center-left coalition that has governed Chile since General Augusto Pinochet's military junta stepped down. The coalition of Socialists, Christian Democrats, and Radicals risks losing the Dec. 13 presidential election. Leading the polls is Sebastián Piñera, a conservative billionaire who controls LAN Airlines, the flagship carrier. The 59-year-old Piñera doesn't plan to radically change the successful mix of fiscal and monetary policies or poverty-zapping cash handouts that the Concertación has championed. But voters seem to feel he is more dynamic than the Concertación's candidate, 67-year-old former President Eduardo Frei, and more mature than Marco Enríquez-Ominami, a 36-year-old Socialist who broke ranks with the coalition when it rejected his candidacy. President Michelle Bachelet, a Socialist who can't run for reelection, is wildly popular. But her 78% approval rating hasn't rubbed off on Frei.