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Reforms based on institutional credibility and a clear understanding of the rules of the game

Interview - January 4, 2015

The Minister General Secretariat of Government, Álvaro Elizalde, as government spokesperson, outlined the reforms being undertaken by Michelle Bachelet's government, among which are the Education Reform, the Tax Reform and a New Constitution.


As Minister Secretary General of the Government, could you please tell us about your short and mid-term priorities of the current administration?

In the first place, this Ministry is in charge of the communication between the government and its citizens. Therefore, we are responsible of informing our citizens about the initiatives the government is undertaking, promoting the dialogue between the two parties, as well as listening to our citizens’ opinion with regards to the different initiatives that we are developing.

Secondly, our Ministry coordinates antidiscrimination policies, and in particular the inclusive policies that allow us to promote cultural changes in order to foment major tolerance and respect for the diversity in Chile. 

In the third place, our Ministry contributes to the strengthening of the civil organizations so that they can have all the necessary tools to develop their work. Therefore, we encourage policies that build up the capability of social organizations, whether they are dealing with regional or territorial issues, or they promote specific matters.

Furthermore, as the Ministry in charge of communications, we promote policies that increase the standards of freedom of expression, as well as the right to inform and be informed in our country. We particularly promote the existence of a broader variety of media in order to ensure that our society can express all its diversity through the different media available in our country.

Last but not least, the Minister Secretary General to the Government also acts as the spokesperson of the current administration.

From your point of view, what is the central focus of President Bachelet’s agenda?

The cornerstone of President Bachelet’s administration is to make a leap that will allow us to build a society with higher levels of cohesion and social inclusion in order to guarantee that the fruits of progress reach everyone in Chile, based on everything we improved under democracy.

That is why we have set significant structural key reforms aimed at laying the groundwork for a less unequal society, based on the historical strengths of Chile:  institutional seriousness, respect of the rules, and the development of serious public policies which have had an impact ton improving Chileans ‘quality of life.

The three key reforms of Bachelet´s administration are: the Tax Reform, the Educational Reform, and the New Constitution. The tax reform is the most advanced as Congress has already approved it. Which are the main goals of the tax reform?

The Tax Reform has indeed been approved by Congress. Even though it generated a significant level of controversy when it was originally presented, it was eventually approved by a broad agreement signed not only by the governing parties of the coalition, but also by the opposition parties represented in Congress. 

The first goal of the Reform is to increase tax revenues by 3%. Up until now, approximately 18% of Chile’s GDP was based on tax revenues. The Tax Reformwill be applied gradually, year by year, and once it is fully implemented, tax revenues will contribute about 21% to the GDP, which is still less than the average in OECD countries.

The second objective is to make the principle of tax equity a reality. This basically means that those who earn more money will contribute more to the State budget through taxes. In the third place, the new system will end all tax evasion mechanisms that where identified in our current fiscal system. And fourthly, we aim to increase corporate taxes and decrease individual taxes. We will eliminate the Taxable Profit Fund, a mechanism that was originally put in place to promote investment, but eventually ended up as a tax evasion mechanism.

All these changes included in the Tax Reform will be accompanied by initiatives to protect the SMEs and promote saving and investment. The Tax Reform is now effective, but it will be implemented gradually; each year there will be a progressive increase in taxes and by 2018, the taxes charges will reach their full magnitude in terms of the contribution to the State budget.

In order to solve Chile’s energy-dependence, the government is working on the Energy Agenda 2014/18. What is the strategy to increase the energy mix and improve energy supply?

We have two main challenges in the Energy sector. The first one is to decrease the cost of power generation, as our electricity is very expensive compared to other Latin American countries, which has a major impact on our competitiveness. Secondly, we have to diversify our energy matrix and increase significantly the renewable, non-conventional energy sources.

That is why we are promoting an ambitious agenda for investment in power generation projects to be implemented during this administration and goes together with a progressive increase in the contribution of clean energy sources to our energy mix.

Chile is considered one of Latin America’s safest countries. Nonetheless, the past few months, a series of bomb explosions have alerted both the citizens and the authorities. What can you tell us about the Anti-Terrorist Law that the Government is currently working on?

Indeed, there have been some bomb attacks that are an exception regarding the peaceful coexistence Chileans are accustomed to. That obviously had generated quite concern in public opinion because we Chileans are not used to violence. This is a very pacifistic country; we have high security standards compared to the rest of Latin America and the lowest homicide rates.

Nonetheless, the Government has provided the State Prosecutor’s Office with all the necessary tools to conduct investigations and significant progress has already been made in clarifying the facts of these incidents. We want to be very clear on this matter: attacks against the peaceful coexistence in Chile will not remain unpunished and those who have participated in them, both physically and intellectually, will be brought to justice.

Additionally, we are working to modify our legislation in order to arm our democracy with better tools to adequately protect our citizens. This includes a modification of the Gun Control Law, which establishes tougher sanctions for those who for those who do not comply. There will also be a new Anti-Terrorist Law, which will provide the institutions with necessary tools to investigate these sort of crimes. In third place, we aim to strengthen the Public Prosecutor’s Office and provide him with adequate tools to carry out his work.

The United States of America is one of the main partners of Chile. With the economic slowdown in China and the resurgence of the US economy, do you think that this could be the right moment to strengthen the promotion of the country and the commercial relations between the two nations?

Undoubtedly. The Chilean economy is the most open one in Latin America.

We are the country that has the biggest number of free trade agreements in the Region: Japan, China, the European Union and the United States of America just to mention a few (23 free trade agreements with 61 countries).

We see in the United States a strategic partner with whom we have been working together for a long time and the Government will strengthen the whole integration process with the US. Not only regarding economic matters, but also in promoting shared values such as democracy and unrestricted respect for Human Rights.

What message would you like to convey to our international audience in the United States?

Historically, Chile has proven to be a serious country and we will remain that way. We are currently going through a process of structural reforms in accordance with our political and institutional system, within the framework of the rule of law. These changes imply absolute respect of the rights of both our investors and visitors, as well as all the people of Chile.

There are certain characteristics that define us as Chileans: we have very clear “rules of the game” here and we respect them; our public institutions are independent; our democracy is solid and vibrant; and institutional decisions are made within the framework of the rule of law, not according to the whims of the authority in power.