Last November I predicted that, if Michelle Bachelet made good on her campaign promises, it would be disastrous not only for Chile, but also for the region.
She’s on her way:
Assault on the Chilean Miracle
President Bachelet wants to raise the corporate tax rate to 35% from 20%. (emphasis added)
Three decades of fast growth—led by liberal economic policies—have made Chile the most prosperous country in Latin America. Its annual per capita income of more than $19,000 is up from $5,000 in 1990. The percentage of Chileans living in poverty stands at 14.4%, down from 45% in 1985.
The country also stands out politically in the region for its adherence to a rule of law that protects minority rights and eschews banana-republic populism.
Now Ms. Bachelet and her minions in Congress are signaling a game change that suggests a return to the political polarization of the early 1970s. It is hard to avoid the conclusion that they see their legislative majorities as their chance to finally ram the utopian dream of the late President Salvador Allende down the collective Chilean throat.
Sen. Jaime Quintana, spokesman for the New Majority coalition in the upper chamber, said as much in March, when the opposition complained that the ruling coalition was using a “steamroller” in Congress. Not “a steamroller,” Mr. Quintana said. “We are going to use a high-powered steam shovel because it is necessary to destroy the antiquated foundations of the neo-liberal model of the dictatorship.”
In addition to raising the corporate tax rate to 35% from 20%, Bachelet wants to eliminate the FUT,
a key provision in the tax code that allows companies to delay paying taxes on earnings if those earnings are reinvested rather than paid out. Known by its Spanish initials as the “FUT,” this provision has provided much of the capital that fueled Chile’s rapid growth in the last three decades.
Wait until she amends the Constitution and starts overspending the mining profits on social programs and running a deficit.
And don’t forget she’s invited Putin already.
Chile goes down, and the Pacific Alliance is o-v-e-r.