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Poverty Reduction in Chile

Poverty Reduction in ChileWith the highest GDP per capita in South America in 2020, Chile’s growth in the last few decades has been viewed as a model for Latin American development. Adopting a laissez-faire approach, the government shied away from significant spending on welfare, with the few existing programs geared toward middle and upper-class Chileans. However, recent administrations have made combating poverty a central theme of their campaigns, with presidents like Sebastián Piñera and Gabriel Boric both committing to the elimination of extreme poverty. Poverty reduction in Chile and the challenges the country faces serve as an inspiration and a warning for other developing nations.

Chile’s Approach to Poverty Reduction

Chile’s approach to poverty reduction is based upon a series of programs that focus on short-term income support and long-term economic security. During the 1990s, the Aylwin administration invested in hospitals and schools while also increasing the minimum wage. These reforms halved the number of Chileans living in poverty while contributing to the country’s steady growth throughout the decade. However, the highly centralized and inefficient public services system, coupled with strikes from teachers and health workers, meant Chile required a new solution for the new millennium.

Chile Solidario

With a new presidential administration and the need for change amid stagnating results, the government introduced ‘Chile Solidario’ as the country’s newest front in reducing poverty. Conceived in 2002, the program aimed to help low-income Chileans on an individual level while simplifying the arcane bureaucracy behind the country’s welfare system. Chile Solidario provided those in extreme poverty with cash stimuli and “psycho-social support” from social workers, assisting with immediate needs and future plans. In addition, the program synthesized many smaller financial assistance programs into a cohesive system, aiming to make aid more accessible to low-income citizens.

The program showed some successes with poverty reduction in Chile, albeit with limitations. The clearest evidence supporting Chile Solidario is the rapid decline of the percentage of people living in poverty in the years after the program’s introduction in 2002, from 29% to 8.6% by 2017.

Furthermore, attendance in schools and hospitals rose significantly, suggesting health and educational benefits in the future. A significant drawback of Chile Solidario is that while many in the program leave poverty, the rates of exit from the program are not as high. A study during Chile Solidario’s early years also found that household income per capita among recipients did not significantly increase.

The administration of Piñera further modified Chile Solidario. In 2012, President Piñera replaced Chile Solidario with the Ingreso Ético Familiar (Ethical Family Income). As part of his broader promise to end extreme poverty in Chile, IEF focuses primarily on conditional cash transfers to eligible Chileans, requiring school attendance and regular health checkups.

Looking Ahead

Unfortunately, the emergence of the COVID-19 pandemic and Chile’s strict lockdown has challenged the nearly continual progress of poverty reduction in Chile, with the poverty rate increasing from the 2017 low of 8.6% to 10.8% in 2020. Chile’s new president Boric promised $3.7 billion in aid in April 2022, undertaking to create new jobs while raising the minimum wage.

The ongoing debate over Chile’s draft constitution offers hope in the fight against poverty, promising to end job insecurity and institute a universal basic income. However, it also risks undermining the gradual, albeit successful progress of the last four decades in its radical rejection of the blueprint of the 1980 constitution.

Poverty reduction in Chile stands at a crossroads, able to embrace more direct government involvement in reducing the poverty rate or continue to let economic growth naturally spread to its poorest citizens. President Boric’s government seems to firmly favor the former, but in September, it is up to Chileans to decide whether they agree with his vision for the country.

– Samuel Bowles
Photo: Pixabay

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What Boric’s Election Means for Poverty in Chile

Boric’s Election
Following a highly polarized election, Chile elected Gabriel Boric, aged 35, as Chile’s youngest president in December 2021. Running as a fierce advocate for poverty and inequality reduction, Boric has pledged to overhaul the country’s economy and society to become more inclusive and prosperous for all Chileans. Winning 56% of the people’s votes, Boric’s election means he has achieved the mandate needed to push through such transformative policies. Through these policies, Chile can become a model for more inclusive economic development that promises adequate living standards for all in a country nonetheless deeply divided over the direction Boric is proposing to take.

Democracy is Critical to Reducing Poverty in Chile

Boric has led to commitments to protect Chilean democracy and avoid the paths taken by other autocratic regimes in Latin America, such as those of Cuba, Venezuela and Nicaragua, in pursuit of socio-economic equality. Boric says that poverty in Chile can only reduce by protecting the institutions that safeguard democratic regimes, such as rule of law, freedom of the press, free and fair elections, constitutional government and support for human rights.

Overhauling Chile’s Economy to Reduce Poverty and Inequality

Between 2019 and 2020, Chile saw a wave of national protests over increased transportation fees that catalyzed into general protests over socio-economic inequality and corruption throughout the country. This allowed the political environment for Boric to thrive to emerge.

After Boric’s election, he pledged to overhaul an economy in one of the most unequal countries in the world to benefit all Chileans and reduce poverty in Chile. Boric has much work to do as 1% of Chileans control 25% of the nation’s wealth. Chile also has a 44.9 Gini index ranking as of 2020, indicating a high level of wealth inequality.

Boric proposed a series of sweeping reforms that include reducing the 45 hour-workweek to 40, expanding pensions and universal health insurance, investing in renewable energy and raising tax rates on corporations historically favored in Chile’s economy to fund investments in infrastructure, education and health care.

Such policies promise to transform Chile’s economy and reorient it to focus on poverty reduction and higher living standards for all Chileans rather than economic growth alone. Boric’s proposals could also address a troubling national problem. About one in five Chileans live in multidimensional poverty as of 2017, a measurement by the World Bank that takes into account “additional deprivations experienced by the poor in addition to the extreme poverty threshold of $1.90.”

These policies could also reduce Chile’s unemployment rate following Boric’s election. Unemployment in Chile as of 2021 stands at 9.1%, indicating that the economy is still struggling with the destabilizing effects of the COVID-19 pandemic where Chilean unemployment peaked at 11.2% in 2020 and stood at 7.3% at the pre-pandemic 2019 level.

Boric’s election offers hope for a better quality of life through investments in infrastructure, education, health care and housing to raise living standards for all Chileans and stimulate the economy at the same time.

Gender Equality: A Critical Component of Reducing Poverty in Chile

Another major strategy of Boric to reduce poverty in Chile is to increase the role of women in the Chilean economy. Boric announced a goal of creating 500,000 new jobs for women over the course of his presidency. Boric intends to prioritize women, who constitute about 50% of Chile’s population, to ensure higher living standards for all Chileans and reduce poverty in Chile in the process. Currently, female labor participation in Chile stands at 41.3% as of 2021. This statistic indicates that there is significant potential for Chilean women to contribute to the economy and reduce poverty if given the equal opportunities Boric pledges to create.

One can also see Boric’s attempts to empower Chilean women in the unprecedented level of representation in his cabinet as 14 out of 24 ministers are women, making Boric’s cabinet the first female majority cabinet in Chile’s history. This unprecedented level of female representation in Chile’s government signals that Boric intends to politically and economically empower Chile’s historically excluded female population. Female economic participation results in dual-income earners, which will help strengthen the economy and build a middle-class society.

Every Citizen Can Play a Role in Reducing Poverty in Chile

Boric’s story itself inspires hope in Chileans that anyone can play a role in reducing poverty in Chile. Boric started out as a student activist from 2011-2013, leading protests for more affordable education opportunities. In 2013, Boric was “elected to congress for Magallanes as an independent.” He then became Chile’s youngest president, inaugurated in 2022.

Boric’s story shows how everyday people can play a role in fighting for equal opportunities and effecting change in Chile and beyond. Given his age, Boric’s election presents the potential for youths to play a part in reducing poverty and achieving a better world for future generations.

Chile is a country that has experienced mass upheaval in recent years due to impoverishment and inequalities that have lingered beneath the surface of its stable economic growth relative to other Latin American countries. Boric offers solutions both for addressing this poverty and demonstrating to a nation hungry for socio-economic security that everyday people have a role to play. Boric’s election serves as an inspiration to the youth of all countries, encouraging them to undertake grassroots activism to address poverty and effect change.

– John Zak
Photo: Wikipedia Commons