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Carta del Director

Economía y Sociedad № 96

July - September  2018

The new birth of democracy in Chile

By José Piñera, president of the International Center for Pension Reform, former Minister of Labor and Social Security and former Minister of Mining (




On Friday August 8, 1980, an extraordinary Cabinet meeting took the irreversible step toward democracy. That day we signed -President Pinochet, the Government Junta and the Cabinet of Ministers- the project of a new Constitution that established a path to a Madisonian democracy (see “Madison en Chile”). Two years earlier, in May 1978, this magazine proposed such a democratic model, emphasizing the need to anchor it strongly in liberty and reason (see “Hacia un nuevo modelo político”).


At the same time, the team of classical liberal economists were laying the foundations of a free -market economic model and advancing “the seven modernizations” project (see “La Revolución Liberal”). At the end of this essay we highlight the recognition of these achievements by Alejandro Foxley, President Aylwin’s key minister, and by Gary Becker, Nobel Laureate in economics. 


Afterwards, everything proceeded according to the master plan designed in 1980: the approval of the Constitution in the plebiscite of September 11, 1980, the inauguration of a constitutional government on March 11, 1981, the building of the institutions of liberty in the next seven years, the presidential plebiscite of October 5, 1988, the presidential election of December 14, 1989 and, finally, the transfer of power to civilian authority on March 11, 1990, in full accordance with the peaceful constitutional process sealed on August 8, 1980. 


The institutions of liberty


Fareed Zakaria, author of the influential book “The Future of Freedom”, argues that “the heart of building liberal democracy is building the institutions of liberty, not holding a quick election. Building the institutions of democracy is not 50% of the work. It is 90% of the work. It was so in Western history. Economic, civil and religious liberties are at the core of human autonomy and dignity. If a government expands these freedoms, it should not be branded a dictatorship.”


The 1980 Constitution required the creation of the “institutions of liberty” between 1981 and 1989. Fourteen “Organic Constitutional Laws” were enacted, such as those of the Central Bank, private universities and television, the Constitutional Court, and all the so called “political laws”.

Organic Constitutional Laws      Date

1.   Constitutional Court                   5.19.81

2.   Mining Law                                1.21.82

3.   States of Emergency                 6.12.85

4.   Electoral Court                        11.15.85

5.   Structure of the State                5.12.86

6.   Electoral Registration               10.1.86

7.   Political Parties                          3.23.87

8.   Regional Councils                       4.6.87

9.   Municipalities                             3.31.88

10. Central Bank                            10.10.89

11. Congress                                     2.5.90

12. Armed Forces                            2.27.90

13. Police                                           3.7.90

14. Education                                  3.10.90

The endgame of this original “re-democratization from the inside” were two referendums: the presidential plebiscite of October 5, 1988 and the constitutional plebiscite of July 30, 1989. From a historical perspective, both referendums consolidated the Chilean Model. 


The presidential plebiscite of 1988


As a pragmatic mechanism to reach universal suffrage in this exceptional circumstances, provisional Article 27 of the 1980 Constitution established the obligation to hold a presidential plebiscite in 1988, at the end of the period of democratic refoundation. In this referendum, the people would vote “Yes” or “No” to the presidential candidate to be proposed by the Government Junta.  Provisional Article 28 stated that if this candidate were approved in the referendum, then the president would “call a general election of senators and representatives… and Congress will be in session three months after the elections”. Provisional Article 29 stated that if such candidate were rejected, then the president will “call presidential and congressional elections in accordance with the permanent articles of this Constitution and with the law”. In this way, these two articles assured the advent of democracy in Chile regardless of the outcome of this referendum. 


It is necessary to highlight a fact of extraordinary importance: from the inauguration of the constitutional government on March 11, 1981, any reform of the constitution required ratification by a popular referendum. This renouncing of constitutional power by the government ensured that the path towards democracy was irreversible.


The 1988 plebiscite was then to determine the person who will hold the presidency for the next term, but it did not alter the fundamental fact that, regardless of the outcome of the referendum, a democracy was to be established in a few months. In this way, the government distanced itself from the illegitimate practice, common to plebiscites, of pressuring citizens to approve decisions by suggesting that rejecting them would lead to “instability or even chaos”. In fact, the argument for stability was a central issue of the “No” campaign (“Voting 'No' only leads to an open election a year later”). 


While the Constitution guaranteed institutional stability to the country, regardless of whether the winners were those who voted “Yes” or those who voted “No”, economic stability was not guaranteed. During the campaign, the opposition “Concertación” attacked the free-market model, and even claimed that it had created “5 million people living in poverty”. Thus, many supporters of the free-market model felt pressured to vote “Yes” because it became a “Yes” in favor of the economic model. Due to the opposition’s behavior, the “Yes” option acquired two different meanings: the literal meaning was to approve a new presidential term for general Pinochet; the implicit meaning was to guarantee the stability of the economic model that was freeing Chile from underdevelopment and poverty. 


On the other hand, many of those who voted “No” believed that their eventual triumph would dismantle the free-market economic model that had been presented to them as unjust and incorrect. However, the Concertación governed for the next 20 years and kept the essential elements of the model. But they neither defended nor explained it, so people acquired a profound distrust with political parties, a disappointment that continues to this day and constitutes a significant obstacle to the country’s progress. The “social cost” inflicted by the then opposition for having used the easy resource of demagoguery against the economic model to win the 1988 referendum continues to be paid today. 


The plebiscite was held on October 5, 1988. The “No” option won 56% of the vote and the “Yes” option 44%. Although the result was clear, its interpretation was not obvious. Although Chileans didn’t grant President Pinochet a new term, they did support the administration’s modernizing legacy. Eugenio Tironi, a sociologist and one of the architects of the “No” political campaign, affirmed that if the candidate had been a civilian, the “Yes” option would have won. He added that if the alternative had been “Pinochet or the revolution”, the “Yes” option would also have won (interview on CNN Chile, June 5, 2013).


So, Chile’s return to democracy, driven from the inside, was a success. It would have been even better if President Pinochet, in addition to following the magnificent example of President George Washington, as they were both willing to give up power, had also declined to seek a third term. Invited to discuss the final steps leading to democracy, I proposed to the president a “Washingtonian gesture” and suggested the idea of an historic farewell address (see the 1796 “Farewell Address” by President Washington). But it is possible that personal safety considerations weighed heavily on general Pinochet’s decision to participate in an electoral race for which he didn’t have any experience. The memory of the near-success of the Communist party’s 1986 assassination attempt on him was still present.


After the end of the Second World War in 1945, Winston Churchill was also advised not to run for office. The hero of global liberty was subsequently defeated by Labor candidate Clement Attlee. A similar experience happened to De Gaulle, whose opposition challenged him not by attacking his policies, but by a simple “that’s enough” (C’est assez) that alluded to his many years in power. 


Unfortunately, instead of contributing to national unity by recognizing the process of returning to democracy from the inside, Chilean center-left leaders invented a black legend according to which President Pinochet was willing to disregard the Constitution. This falsehood has been categorically denied by general Fernando Matthei, member of the Government Junta, in his letter to El Mercurio on January 12, 2012: “I assure my fellow citizens that there was never any uncertainty on the part of either President Pinochet, or any member of the Government Junta, about faithfully respecting the referendum results and strict adherence to the Constitution we gave to the country” (see the complete letter here). In South Africa, under more difficult circumstances, President Nelson Mandela recognized former President De Klerk’s contribution and both leaders won the Nobel Peace Prize for their role in the transition to democracy. In Chile, the attitude was the opposite.


The demagoguery employed against the economic model in 1988 and the historical falsification beginning in 1990 are the two great sins committed by the center-left in this process. Their willingness to participate in the redemocratization process and in the referendums of 1988 and 1989, are its two contributions. 


The constitutional plebiscite of 1989


After the presidential plebiscite, the rules established in the Constitution’s provisional articles to achieve democracy had accomplished their objective. However, some of the permanent articles of the  Constitution were still questioned by the opposition. 


This opened a window of opportunity. The center-left wanted a reform in 1989 as they were confident to win the presidential and parliamentary elections at the end of the year, but they did not believe they would achieve the majority required to reform the Constitution and didn’t want to begin their government with a complex constitutional debate. On the other hand, the liberal faction within the government recognized that some of the constitutional articles were unnecessary and, above all, they understood the political and historical value of achieving a consensual constitutional reform by involving the opposition. The stars aligned in 1989 for an historic agreement between the government and the opposition regarding constitutional reform. The most important one was the mechanism by which the Constitution might be reformed in the future. The agreed constitutional reform was announced by President Pinochet on May 30, 1989. On June 15, a referendum was called for July 30. This time, 91% of the people voted “Yes”. 


A new political era began then with a Constitution overwhelmingly ratified in a plebiscite and explicitly accepted by the democratic opposition. Edgardo Boeninger, the right hand of President Aylwin in the constitutional negotiation and his future Minister of the Presidency, affirmed that with this referendum “the opposition to the government explicitly accepted the modified Constitution of 1980” (“Democracia en Chile, Lecciones para la gobernabilidad”, 1997).


The triumph of the Chilean Model


The fulfillment of the process established by the Constitution brought prestige to President Pinochet and his government in a way no other previous event had done, since it confirmed the exceptional nature of the Chilean experience. This process was also praised by the two great leaders of this period: President Ronald Reagan and Prime Minister Margaret Thatcher. The fall of the Berlin wall only four months before Chile’s transfer of power was providential and lifted the veil that shielded the monumental failure of socialism all over the world. 


March 11, 1990, the day when the transfer of power to a civilian government democratically elected took place, was what Stefan Zweig would have called a “stellar moment” in Chile’s history. New horizons were opening globally for the ideas and experiences of freedom. An exceptional and successful refoundation of democracy had concluded in Chile. The engine of change had been the government, which consolidated its historic legacy: the economic model, the seven modernizations, and the Constitution of 1980. 


The Chilean Model



     Pinochet made the most important changes on the Chilean economy of this century.


His policies anticipated the globalization process that began a decade later to which all countries in the world are trying to get into. We must recognize that he and his team of economists were visionary.


This is an historic contribution that will last many decades in Chile. Those of us who were critic about some aspects of those policies, recognize today that these changes had historical impact in Chile that have been accepted by almost all parties.


In addition, they have passed the historical test because these policies changed Chileans’s lifestyle for the better.


Alejandro Foxley
Finance Minister of President Patricio Aylwin
(Cosas, 5.5.2000)

Chile rocket image.001.jpeg

The Latin American Free Market Revolution


        On my first visit to South America in the early 1980s, I heard a candidate in the Colombian presidential elections attack the "Chicago boys." These were not remnants of Al Capone's gang but Latin American economists educated in the Department of Economics of the University of Chicago. 


Chicago boys generally advocated widespread deregulation, privatization, and other free market policies for closely controlled economies. They rose to fame as leaders of the early reforms initiated in Chile during the rule of General Augusto Pinochet. Chicagoans were attacked partly because central planning and government controls were still advocated by economists in that region.


The revolutionary economic reforms initiated in Chile caused that economy to boom beyond the wildest expectations even of their teachers at Chicago. Chile's annual growth in per capita real income from 1985 to 1996 averaged a remarkable 5 percent, far above the rest of Latin America.


Chile became an economic role model for the whole undeveloped world. Other nations began to believe that free market reforms could also help them. Chile's success especially grated on its large rival, Argentina. Chile and Argentina were soon followed down the path of free market policies by Mexico, Peru, Bolivia, and Colombia. 


The changes initiated by the Chicago boys in Chile have spurred an economic and political revolution in Latin America that is unlikely to be reversed. Their teachers are proud of their richly deserved glory.

Gary Becker

Nobel Prize in Economics

(Business Week, 6.9.97)

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