Chile's state-owned mining company Codelco is the world's largest producer of copper; the five-fold increase in copper prices since 2003 has been a boom-time for the government's coffers...

BACHELET OUTLINES BROAD NEW SOCIAL SPENDING, BACKED BY STATE COPPER PROFITS
CENTER-LEFT CHILEAN PRES. VOWS TO UPHOLD FISCAL DISCIPLINE, SAVE FOR PRICE CORRECTION
22 May 2006

Michelle Bachelet, Chile's first female president, has faced opportunity, temptation and regional economic upheaval, and she is showing signs of following the wisest course, while staying faithful to her pledges. In her first state of the nation address to the Congress in Valparaíso, the new president has said she will use windfall state profits from the inflated copper markets to fund social programs, but without relaxing her policy of strict fiscal discipline.

Her new program would increase investment in education, healthcare and housing services, ultimately leading to the creation of thousands of new jobs. She has said it is wise to invest the profits from the recent copper boom in her nation's future. She has also issued a one-time $35 —18,000 Chilean pesos— grant to the 1.2 million poorest low-income families across the country.

But she has affirmed she will abide by her platform requirement that her government produce budget surpluses of 1% of GDP over each 5-year period. It will also be necessary to spend wisely and ensure savings, as prices for copper on international markets are clearly "temporary" and will have to correct in time.

Pres. Bachelet also promised that her government will be committed to uncovering the whereabouts and the nature of the crimes against political dissidents disappeared by General Pinochet's secret police, during the dictatorship. Thousands of people were abducted, tortured and killed under Pinochet's regime, between 1973 and 1990, and hundreds remain unaccounted for. Bachelet lost her father to the regime; he died in prison under unclear circumstances after being detained for his political views.

At present it looks as if the expenditures will not increase the burden on government to keep spending in line with revenues, due to the large increase in revenues, most of which is being held for future uses. Of the huge profits from copper revenues in the first months of 2006 —the price has jumped 69% in 4 months—, only $130 million is being pledged to the spending increases, meaning discipline is still the watchword for Bachelet.

The Chilean finance minister, Andrés Velasco, has since announced there is plenty of funding to pay for Bachelet's expanded social programs. He also noted there was a budget surplus of 2.3% of GDP in the first quarter of 2006, due largely to the copper boom.

Outside the Congress, there were violent disturbances as state police clashed with demonstrators, detaining as many as 60. March organizers said police used excessive force and detained non-aggressive peaceful protesters.

While early reports say the protesters' demands were unclear, the march is likely linked to recent pressure from left-wing parties for Bachelet fulfill a campaign promise to replace the Pinochet-era "binomial" electoral system —which pressures "lists" of candidates to fall into only two main factions— with a more open ballot process. [s]

• Bloomberg: "Chile Raises Spending $130 Million With Copper Funds"
• Los Tiempos: "Bachelet promete un Chile moderno hasta el año 2010"
• Radio Univ. de Chile: "CHILE: anuncios de Bachelet costarán 130 millones de dólares, dijo Velasco"

BACKGROUND:
BACHELET TAKES OFFICE, CHILE'S FIRST WOMAN HEAD OF STATE
14 March 2006

Michelle Bachelet, winner of Chile's recent presidential election, has been sworn in and has taken power as the nation's first woman president. She inherits the economic legacy of fellow socialist, outgoing pres. Ricardo Lagos, who leaves surpluses in government revenue, a rapidly expanding economy and a well-functioning balance between free market policies and expansive social programs. [Full Story]

CHILE ELECTS FIRST FEMALE PRESIDENT
OUTGOING PRES. LAGOS SAYS CHILE MORE OPEN, MORE MODERN, MORE JUST
16 January 2006

Michelle Bachelet has a long and turbulent political biography. She and her mother were kidnapped and tortured by the Pinochet government, after her father was murdered for his political affiliation with the Allende government. They were forced into exile by the military regime and Bachelet has worked to restore democratic principles to Chilean government. Like Ricardo Lagos before her, also a political prisoner under Pinochet, she is a moderate socialist, intent upon leading Chile's governing center-left coalition and her nation to a prosperous future, through wholly democratic processes.

Bachelet ran a campaign that promised to continue Chile's free market policies, and to increase social benefits to help reduce the gap between rich and poor, one of the largest in the world. She had served as Minister of Health and then in 2002 became the first woman to serve as Minister of Defense in a Latin American country, under the presidency of outgoing president Ricardo Lagos. [Full Story]