(Bloomberg) -- As rioting broke out across Chile in October, President Sebastian Pinera watched his political agenda go up in smoke.
Just 18 months after taking office on promises to expand the private pension system, cut taxes for the rich and clamp down on crime, Pinera saw his legislative plans swept away by the biggest street protests and riots since the return of democracy in 1990.
Every single one of his flagship policies is now being ditched, reversed or revised. Under a new finance minister, the government’s efforts are centered on placating protesters through spending increases, upending election pledges to narrow the fiscal deficit. Pinera’s biggest concession, a plan to rewrite the constitution, was negotiated by lawmakers from almost all the main parties. The president, who has resisted calls to resign, only endorsed it two days later.
“His manifesto and policies are gone, done, finished,” said Javier Sajuria, a senior lecturer from Chile at Queen Mary University in London. “He may just become an administrator for a political agenda set by the parties in congress.”
With two-and-a-half years of his mandate to go, Pinera’s approval rating has slumped to 12%, according to the latest poll from Cadem. Some opposition lawmakers have even started an impeachment process, though it is unlikely to succeed.
It’s tough on a billionaire accustomed to success. He was elected in late 2017 for a second, non-consecutive term because he was seen as efficient, someone who could translate his business skills into faster economic growth for the country.
For the first year, it all seemed to go well. Growth rallied to 5.3% in the second quarter of 2018 -- his first three months in office -- and investment soared. But by 2019, things had started to go wrong.
The economy was losing steam, expanding just 1.5% in the first quarter, and Pinera’s pension and tax reforms were stalled in Congress. Worse still, a bill designed to make the labor market more flexible had been hijacked by the opposition, who wanted to slash the working week to 40 hours.
And then, seemingly out of nowhere, the protests erupted and Pinera’s reform package became ancient history overnight.
The protesters want better pensions, education and health-care, as well as a new constitution. But they don’t want the kind of small, piece-meal increases in spending Pinera had proposed, they want a proper welfare state. After 30-years of being told they live in Latin America’s miracle economy, they want to see the benefits.
The president is now fending off calls from the extreme right to clamp down on the protests, and the extreme left demanding his resignation.
“This is no longer Pinera’s government, because his agenda has gone,” said Robert Funk, a political science teacher at Universidad de Chile. “The government is reactive now, constantly changing depending on the demands on the street.”
From the very start of the anti-government protests Pinera has struggled to respond appropriately.
After calling out the army on the first night, the president went on to declare war on protesters. It was a mistake. Within days he was backtracking, apologizing and calling the protesters’ demands legitimate.
“I have been surprised by his constant incapacity to read the situation and to give answers,” Funk said. “But ultimately, the government has to come up with answers.”
Now others are taking over. It was a common joke in the past that Pinera’s finance minister was Pinera himself. Not any more. Less than two weeks after the explosion of social rage, the president fired eight ministers, including his long-serving Finance Minister Felipe Larrain. In came soft-spoken, mild-mannered Ignacio Briones.
More than anyone, it is Briones who is setting the economic agenda. He was the one who agreed with opposition lawmakers to raise the minimum pension by 50% within three years.
The protest movement is now in its sixth week and in many poorer areas of the country it has degenerated into a wave of looting and arson. Hotels have been ransacked, public buildings burnt, shops looted and traffic lights destroyed.
While the wealthy areas of Santiago continue much as normal, life in lower-income areas is seriously disrupted. As the economic cost rises, the peso slumped to a record low both Wednesday and Thursday, prompting the central bank to intervene, offering as much as $10 billion on the spot market. That is equivalent to a quarter of its total foreign currency reserves. The peso gained 2.3% Friday.
Now Pinera is trying to rally support for a new law and order agenda, pushing bills to ban face masks in demonstrations, make it easier to call out the army to defend infrastructure and increasing the number of police on the street. Some in the opposition are beginning to swing into line.
“The time has come to say enough!,” Pinera said in a press conference Wednesday. “It’s time for us to join together in our commitment and determination to fight the violence.”
Yet every time he has attempted to lay down the law in the past, Amnesty International, Human Rights Watch or another organization has come out saying that the police have systematically used excessive force.
Some opposition lawmakers have filed a Constitutional Accusation against him for alleged human rights violations committed by security forces. While the impeachment is unlikely to garner the two-third of senators required, the backlash against Pinera has often forced him to change tone and promise to investigate cases of abuse.
“He could have been the president who led the transition,” Sajuria said. “But he doesn’t have the credibility for that.”
Whatever happens, Pinera is likely to limp to the finish line of his term.
“I don’t think he will resign,” Sajuria said. “It’s not like his personality to do that. We have a very presidential system and when that president is weak, there is no easy way out of that power vacuum.”
(Adds peso response to intervention in the 19th paragraph.)
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