Corruption Scandals Tarnish Chile’s Strong Rule of Law Reputation
James M. Roberts /
With an overall score of 78.5, Chile remained the 7th freest economy in the world in the 2015 Index of Economic Freedom and retained its rank as first in the Latin American and the Caribbean region. Beginning with the first edition of the Index in 1995, successive governments in Chile from the center-left and center-right have made steady progress toward increasing economic freedom in large part by strongly maintaining the rule of law by an independent and efficient judicial system.
Unfortunately, there are warning signs on the horizon for Chile. Already, Chile’s 2015 score on Freedom from Corruption declined by more than one point from 2014—one of the reasons why Chile’s overall Index score dropped in 2015.
Now, a fresh spate of public corruption cases threaten to drag Chile’s future corruption scores lower still.
The highest profile national embarrassment involves the son and daughter-in-law of President Michelle Bachelet. As reported in The Economist:
In February [2015] Qué Pasa, a magazine, revealed that the president’s son, Sebastián Dávalos, had secured a $10 million loan from Chile’s second-biggest bank for a small and undercapitalized property company called Caval and half-owned by his wife. The loan was granted the day after Ms. Bachelet won the presidential election. Caval used it to buy three plots of rural land, which soon afterwards were re-zoned to allow urban development, netting the company a profit of $5 million when it sold them days later.
As Laura Sharkey and Jorge Godoy Coy report in Forbes, another scandal involves
complex fraud schemes at a domestic investment bank and at a mining company [that] appear to have links to illegal campaign financing. The combined effect has caused the president’s approval ratings to drop 13 points in the first three months of the year and called the integrity of Chile’s political class into question. Hanging in the balance is its potential to tarnish the country’s image.
To her credit, President Bachelet, has pledged to make campaign finance reforms and has ordered the full resources of law enforcement to investigate the scandals. Just yesterday, in fact, she made another attempt to rebuild public trust in her government by demanding that her entire cabinet tender their resignations.
Bachelet has also made a sort of public penance for the sins of her son by announcing that she will not run for public office again when her term expires in 2018. Let’s hope the rest of Chile’s business and political elites improve their behavior, too, and that the Chilean media and people continue to hold them accountable for their actions.