Chile's new gov't promises change, faces challenges

10:44, March 12, 2010      

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The government of new Chilean President Sebastian Pinera, which took office on Thursday, will have to first focus on the emergency created by the Feb. 27 8.8- magnitude earthquake, before fulfilling Pinera's campaigning promises of boosting efficiency and creating jobs.

As if to underline the overwhelming importance of the emergency, a 7.2-magnitude aftershock struck at 11.41 a.m. local time Thursday, delaying Pinera's swearing-in ceremony at the Congress in Chile's central city Valparaiso. Two other quakes measuring above 6 on the Richter scale followed within 25 minutes.

Pinera promptly declared a state of catastrophe for Rancagua, the capital of the O'Higgins region where the epicenter of Thursday's major aftershock was located. Officials there told local radio that a footbridge had collapsed close to a highway in the city.

Pinera made his first journey as president to Rancagua to see the damage caused by the earthquake there. Pinera's team had estimated that Chile needs 30 billion dollars to bounce back from the Feb. 27 quake. Thursday's events can only have added to that bill.

Chile will be helped by the fact that it was prepared for such natural disasters and that its two biggest industries in gross domestic product (GDP) terms -- copper mining with 16.4 percent of the GDP and financial services with 16 percent -- are least affected by the quake, which killed at least 529 people and wrecked 500,000 homes.

The National Copper Corporation of Chile (Codelco) told media on Thursday that its mines, the largest in the nation, are largely untouched. Chile is the world's biggest copper exporter, with a more-than-10-percent share of the global market.

Chile also has the advantage of a history of government frugality. It has 11 billion dollars saved in a fund established in times when copper prices were high. The country can count on its citizens to provide help too. A telethon organized on Friday and Saturday last week raised close to 60 million dollars in pledges from citizens, and the money will go to non-governmental organizations that provide shelter.

In purchasing power parity terms Chile has the highest gross domestic product per capita in Latin America, with 14,300 dollars per person, according to World Bank data.

Chile was frequented by major earthquakes in history, which helped the Chilean government and people to be better prepared for the disasters. The world's strongest quake ever recorded, which measured 9.5 on the Richter scale, occurred in southern Chilean city Valdivia in 1960. Chile's buildings have strict construction codes and most of the cities closest to the epicenter reported few building collapses, though power and sanitation services were interrupted.

However, the challenges brought by the earthquake were still quite grave for Pinera's government. Billions of dollars is needed in the relief and reconstruction efforts, while some industries were also severely impacted.

A tsunami triggered by the earthquake destroyed ports and fishing vessels on Chile's Pacific coast. Fishing represents only 3 percent of the country's GDP, but the destruction of ports would have a far-reaching impact on industries with a dependence on export and import activities.

Meanwhile, the oil refineries in Bio Bio and Aconcagua, which produce 380,000 barrels a day in total, will be out of service for three months, affecting both state revenues and downstream industries like chemical production, which represents nearly 5 percent of the GDP.

As a successful businessman with a personal wealth of 2 billion dollars, Pinera may be better prepared for the difficulties that strike industries, but he will also have to face lots of social problems. Around 500,000 homes have been destroyed, according to Red Cross estimates. The southern hemisphere winter is about to begin and the homeless people are mostly living in tents and therefore at the risk of contracting contagious diseases.

Michelle Bachelet, Pinera's predecessor who left office on Thursday, has already launched a vaccination program targeting hepatitis and started to tackle health risks. However, the ex- president, also an epidemiologist, pointed out at a recent press conference that 13 hospitals in the country have become unusable after the quake, while 130 others suffered damage of varied extent.

The new president also needs to rebuild the reputation of government agencies in charge of emergence response and management. The National Emergency Office (Onemi) has been fiercely criticized by the public and media for its slow response, while the Navy-run Oceanography and Hydrology Office (Osha) has been accused of failing to warn about the post-quake tsunami in time. The heads of both agencies have lost their jobs.

Obviously Pinera has been drawing lessons from the previous administration. While the Bachelet government waited four days before sending in troops to stop rampant mob looting in the quake- hit city of Constitucion, Pinera has promised to send troops to Rancagua and nearby areas as early as Thursday night should they be needed to prevent a breakdown of public order.

Source: Xinhua
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