A Cautious Embrace of Markets: La Concertacion (1990-2002)

The explicit mission of the Concertacion governments after 1990 was to restore law and order to Chile through authentic democratic institutions, and to bring some degree of equity and social justice to a society that experienced a growing disparity between the very rich and desperately poor as a result of free-market policies. Although the center-left Concertacion represented a coalition of those sectors opposed to dictatorship, the movement never repudiated the neoliberal economic regime of the Pinochet government.

As President, Patricio Aylwin was mainly concerned with re-building democracy by strengthening institutions, reforming the constitution and electoral system, and limiting the influence of Pinochet and the military in political matters. Freedom of markets, trade, and investment remained primary for facilitating economic growth, despite the fact that market-centered growth might be proliferating the inequality the Concertacion government had committed to reduce. Aylwin "tried to soften the worst consequences of the market model by creating a series of programs to protect the poorest sectors of the society, with the goal of diminishing the numbers of those living in poverty."1 Under Aylwin, Chile's economy grew at an average of 7.7 percent annually, making it one of the most advanced economies in Latin America.

Economic growth continued under the second Concertacion president, Eduardo Frei, until the contagion caused by the Asian financial crisis stalled growth in 1998. The failure of Long Term Capital Mortgage (LTCM) in the United States in late 1998 put even more pressure on the export-oriented economy. As a result, the third Concertacion president Ricardo Lagos (the first Socialist to hold office since Salvador Allende) inherited a lagging economy. Despite his political pedigree, Lagos (like his counterparts Lula in Brazil and Kirchener in Argentina) continued to let the private sector operate, assuming that freer trade and liberal markets would revitalize the economy. Under Lagos, several new free trade agreements were signed giving Chile bilateral and multilateral rights with trading partners in Europe, Asia, and Latin America.2

1 Silvia Borzutzky and Lois Hecht Oppenheim, After Pinochet: The Chilean Road to Democracy and the Market, (University Press of Florida: Gainesville, 2006) p. xiv.
2 Ibid., p. 99.