Chile’s New Government: Priorities and Challenges

Chile’s new administration is well disposed towards Australia and keen to learn from the “Australian model” in a range of sectors.

President Michelle Bachelet took office on 11 March and her new administration is already proving well disposed towards Australia. Senior Cabinet figures regard Australia as a model and are keen to learn from Australia’s experience in a range of sectors. Priority areas of focus for the Bachelet Government that could provide new opportunities for Australia include environment, education and public sector reform.

Chile’s need to secure reliable energy supply could also open new opportunities.
The overarching priority of the new Government is poverty reduction. However, the Administration has emphasized the importance of maintaining economic growth as a necessary precondition for its social reform agenda.

Therefore, macroeconomic policy settings are likely to remain largely unchanged. The Government has committed to focus on innovation and technology, improve assistance to small and medium enterprises and reduce red tape. Chile is particularly interested in Australia’s model of innovation.

Australian expert, Dr Terry Cutler, visited Chile in August to speak about the Australian innovation model. His visit was funded by the Council on Australia Latin America Relations (COALAR). Education is also a key priority. Bachelet has announced the funding of overseas tuition for 900 English pedagogy students. Around 500 overseas doctoral scholarships will also be offered. The number of Chilean students studying in Australia has doubled between 2004 and 2006. Over 20,000 people attended the Australian Education Fair in Santiago (24-27 August), demonstrating the strong potential for further growth in this sector.

The Government is pushing ahead with plans to designate Chile’s first Minister for Environment and to improve environmental standards. Although some in the private sector have opposed such a move, many are voluntarily looking to improve their environmental management. Australian companies are already working in waste water, industrial waste and environmental management of mine closures.
Opportunities are also emerging in agribusiness. Chile is attempting to improve its breeding stock and specialty export products (such as Wagyu Beef). Interest in Australian genetic material and live animals has been growing, with exports more than doubling since 2001.

While the economy continues to perform strongly on the back of record copper earnings, a major challenge for Chile is to secure a reliable, long term energy supply (Chile imports 95% of its hydrocarbons). This may include a greater focus on renewable energy, with possible opportunities for Australian renewable energy companies (see related article). There could also be potential for Australia to increase its coal exports to Chile, which currently make up around 50% of total exports.