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Chile’s private sector “will always work with the government”

Interview - January 20, 2015

Despites his discrepancies with the way the government is applying structural reforms, Andrés Santa Cruz, President of the Confederation of the Production and Commerce (CPC), reaffirmed that the private sector will always work with the government to ensure the success of Chile and stressed the necessity of positive dialogue to reach common goals.


In March 2013, you were appointed President of the Confederation of the Production and Commerce (CPC), the apex body representing the private sector in Chile. What is your balance of the latest activities of the CPC?

I believe the balance is very positive. The CPC traditionally acts as the spokesperson of the private sector in the dialogue with the government, aimed at contributing to the design, improvement and better implementation of sound public policies. Within that context, I think it is important to highlight the crucial role the private sector has played in the development of Chile, by creating growth and job opportunities.

Chile is considered Latin America’s economic miracle. Nonetheless, the economy has recently decelerated and uncertainties have emerged. In your opinion, what were the main factors that contributed to Chile’s success and what are the current challenges? 

The key to Chile’s success is the fact that we have managed to preserve a solid and stable democracy since the end of military rule. Furthermore, we have very solid institutions; the Central Bank of Chile is autonomous; our fiscal policies are ruled by a structural surplus policy; we are very rigorous in terms of macroeconomic management; and the private sector is the real engine of our economic growth. All these factors made it possible for Chile to attain the highest income per capita in the region. But at the same time, all these achievements generate new and more complex challenges for the future.

I believe that as we move forward, we must implement new reforms that will allow us to increase the competitiveness of our economy, and by doing so the competitiveness of our private sector will increase as well. On the other hand, we have to face important challenges, such as overcoming poverty and reducing inequalities in our society. A lot of progress has been made in these areas over the past three decades. As a result of an economic model that has brought us constant successes, today in Chile we enjoy a quality of life that we couldn’t even dream of 30 years ago. But there is still a lot more to be done.

In my opinion, two main factors have caused the current economic slowdown in Chile. The first one is related to the global economic cycle, which inevitably has an impact on Chile’s growth. But the second factor that has caused uncertainty in Chile today is internal, and it is mainly due to the government’s intention to implement a large number of structural reforms simultaneously. No society can maintain total stability while undergoing such significant changes.

You have criticized the way the government is implementing reforms on various occasions. On the other hand, government officials say that when they travel abroad, foreign businessmen don’t express the same uncertainties.

We have not criticized the fundamental objectives of the reforms. What we have criticized are the instruments that have been proposed to attain these objectives.

When the tax reform was presented, we agreed it was necessary to do it in a way that would allow the country to rely on permanent income for permanent expenses. Secondly, we also agreed it was important to use those resources to fund an essential deficit we have, which is quality education. Therefore, we completely agreed with the main goals of the reform. However, we believed it lacked investment incentives, and at the same time we pointed out certain operational problems.

In terms of the education reform, we totally agree with the fact that it is a major challenge for our society. Nevertheless, when the first bill was presented, we realized it was not really focusing on quality education, like improving teacher’s quality or public education, but it rather focused on financing issues.

What do you think is the best way to improve the quality of education in Chile and decrease inequality?

When it comes to improving the quality of the education system, I think it is important to see what is going on in the classrooms. We have to evaluate the performance of our teachers in order to train them according to the best international practices. Also, the teachers need to be motivated by better salaries and working conditions.

Besides that, we have to invest more in early education, because those first years in a child’s life   are critical for the development of his potential and future capabilities. We also need to improve the skills of our workers in order to solve inequality issues, and we need to be able to guarantee truly equal opportunities to all our citizens, and that can be achieved by providing quality education for all.

The high cost of energy is seriously affecting the competitiveness of Chile’s economy. What do you think about the reforms that the government has proposed in this sector?

Chile has many years of delay in energy matters and we believe the direction taken by this administration is correct. We don’t have natural resources like oil and gas, but we do have water, which is a clean and renewable source that generates cheap energy. We have to do everything possible to make the necessary investments and to obtain energy at competitive prices, always keeping in mind the respect of the local communities and environment. I believe that hydropower should be the key element of our energy matrix and also we should not leave aside the solar capacity that, because of our natural conditions especially in Chile’s northern regions.

What do you think about the government’s approach to the labor reform?

I believe that instead of a labor reform, there should be a labor agenda with the following objectives: how to create more and better quality jobs, especially bringing more women and youth into the labor force; how to increase the salaries, and how to improve the productivity of the workers. Once we reach an agreement with regards to these objectives, then we should discuss the best instruments to achieve them. We must recognize that in Chile workers are organized in Unions that represent about 18 % of our working force, which is a much higher figure than in many other OECD countries. France, for example, has only 7.8% of its workers unionized.

Also, we really need the educational reform, which will allow people to get better training and access to jobs that require higher qualifications. We have to focus our efforts on implementing policies that are set in that direction.

Why do you think it is not beneficial for companies to finance political campaigns?

I believe that the financing of political campaigns should come from public funds and individuals. Companies represent their shareholders and politics can sometimes generate too much controversy. Furthermore, when a company funds a campaign, the suspicion arises that the favor will eventually be returned in some sort of irregular form. So we must have a serious and grounded discussion in search of the mechanisms that will, on the one hand, guarantee transparency and, on the other, discourage companies from contributing to political campaigns.

Do you feel the concerns of the private sector are reaching the government at this point in time?

I feel that we have good communications with the government. There is a will to listen and discuss things. Also, I have absolute confidence in President Bachelet and I believe her primary objective is the wellbeing of Chile.

What do you think the country should do to attract more investment at the moment?

First, it is very important to terminate the uncertainties that have emerged because of the many reforms taking place simultaneously. For example, the sole expectation of a constitutional reform has created uncertainties in the international investment community.

Secondly, we have to address the energy issues in a very efficient and responsible way in order to reduce the cost of energy and attract more investors. We have to work closely with the communities and be very respectful of the environment, but we have to ensure projects are executed in order to become more competitive and increase our productivity levels.

Thirdly, we have to continue developing microeconomic policies that will allow us to generate more qualified workers and to incorporate women in all aspects of our society, enabling us to introduce important increases in productivity. We have to achieve international standards of a highly globalized world.

The United States is reemerging from the economic crisis and reaffirming its position as the world’s leading economy. What should be the strategy to increase Chile’s promotion in the US?

The economic indicators of the United States are very important for the global economy. The US is doing things right, the markets are recovering, the demand is growing and new opportunities are coming up, making the US a very appealing destination for business. At the same time, the Trans Pacific Partnership (TPP) that is being negotiated between 12 countries from both sides of the Pacific Ocean is moving forward and it seems that we may have important news in this respect in the coming months. This will be a very important instrument for the economic relationships between our countries.

At the same time, Chile is the perfect example of a serious country with solid institutions. We have consistently applied sound macroeconomic policies for more than 25 years. Our democracy is vibrant and keeps consolidating. We have many challenges, but we have achieved certain levels of growth and prosperity of which we are very proud. It is also the responsibility of the private sector to help overcome these challenges and increase its promotion in the United States. At the same time, Chile is a great place for investment and I encourage Americans to come and invest here.

I am a great supporter of public-private partnerships. We must all work together. The private sector will always work with the government and that is what we are doing now. We are going to do our best to collaborate in the creation of better public policies to ensure the success of Chile. It is necessary to have a positive dialogue and to reach common goals. Successful societies are capable of discussing their policies through an open dialogue. Chile has chosen that path for the last 25 years and I am certain we will continue that way.

We also want to invite American tourists to come and enjoy a country with infinite natural attractions, ranging all the way from deserts, mountains, glaciers, forests and sea, and topped by the warmth and hospitality of our people.