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Global Scale by Coletta Kemper A Chile Reception

Check your ginormous southern exposure for a potentially profitable market.

By  Coletta Kemper

A ginormous thing happened last year that got little notice. It was the election of Michelle Bachelet, the first woman president of Chile and only the second woman president in the history of South America. Last year Forbes ranked her 17th in a list of the 100 most powerful women in the world.

I learned of President Bachelet at a dinner party shortly after her election in March 2006. One of the guests was Chilean by birth but hadn’t lived in the country for more than 20 years. When asked what he thought of a woman president, he smiled and said, “I know her and she’s a very, very bright woman.”

As it turns out, he was more than a close family friend. When Augusto Pincochet’s coup ousted Salvador Allende’s government in 1973, our dinner companion and Air Force Brigadier General Alberto Bachelet Martinez were imprisoned together on charges of treason for supporting Allende’s government. The General died in prison of a heart attack. Our dinner companion was eventually released and exiled to the United States. The general, of course, was Michelle Bachelet’s father. Our dinner guest and his wife have now returned permanently to Chile to live.

It’s a good story with a touch of poetic justice, but I was curious to know more about what kind of leader President Bachelet would be. Chile isn’t a large market, but it is still an important one in the region.

In a 2006 report on competitiveness, the World Economic Forum ranked Chile 27th in the world—and the highest in Latin America and the Caribbean. The report notes that Chile has high levels of transparency and openness rivaling some EU countries. Its efficient market and supportive government coupled with good macroeconomic policy have created an environment ripe for rapid growth and sustainable efforts to reduce poverty. The U.S. is Chile’s largest trading partner.

Who President Bachelet is and what actions she takes are important to brokers and their clients operating in the country. The McKinsey Quarterly recently interviewed President Bachelet, and her responses to key questions provide some insight into what makes her tick.

A moderate socialist, Michelle Bachelet campaigned on a platform of continuing Chile’s free-market policies, while increasing social benefits to help reduce the gap between the rich and poor. She is a medical doctor by training and studied military strategy. She also served as health minister and defense minister under President Ricardo Lagos.
Just a year into her term as president, Chile’s economic outlook is good, but she faces some real challenges and pressure is building for social change.

In her McKinsey interview, President Bachelet believes Latin America is facing an important time. Democracy has taken root, and all 12 elections in the past year have been democratic. At the same time, economic and social indicators are improving. However, social reform in some countries is lagging behind economic reforms.

“The problem has not been with open economies per se but rather the lack of action in addressing poverty and social injustice,” she told McKinsey. Her vision is for Chile to be regarded “as a modern society with a modern system of social protection and an open economy” and to be “a player on the world stage”—but not to throw its weight around, she was quick to add.

To make her vision a reality, President Bachelet says equal opportunities from the beginning are essential, and education is the main issue. “This is not a matter of social justice; education is a vital economic agent.” Chile has a shortage of people with technical qualifications, and education is fundamental in attracting foreign investment, she noted.

She said her government is not looking to take private more government-owned companies because they are functioning well. She does want to improve corporate governance in public companies—“transparency, management, professionalism and the value they add for their owners, the people of Chile,” she told McKinsey.

She also feels that public-private partnerships are key to public works projects, such as building and improving roads, ports and airports. Financial concessions to private companies are an important incentive.

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