A CONFIDENT BACHELET - AND CHILE - RIDING OUT THE STORM

Código Fecha Clasificación Origen
08SANTIAGO922 15 October 2008 Confidencial Embassy Santiago

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VZCZCXYZ0001
RR RUEHWEB

DE RUEHSG #0922/01 2891548
ZNY CCCCC ZZH
R 151548Z OCT 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC 3815
INFO RUEHAC/AMEMBASSY ASUNCION 3562
RUEHBO/AMEMBASSY BOGOTA 2117
RUEHBR/AMEMBASSY BRASILIA 0458
RUEHBU/AMEMBASSY BUENOS AIRES 1073
RUEHLP/AMEMBASSY LA PAZ OCT LIMA 5726
RUEHQT/AMEMBASSY QUITO 1935

C O N F I D E N T I A L SANTIAGO 000922

SIPDIS

E.O. 12958: DECL: 10/13/2018
TAGS: PGOV, PREL, CI
SUBJECT: A CONFIDENT BACHELET - AND CHILE - RIDING OUT THE
STORM

REF: A. SANTIAGO 919 AND PREVIOUS
B. SANTIAGO 912 AND PREVIOUS

Classified By: Ambassador Paul E. Simons for reason 1.4 (b and d).


Summary


1. (C) Bachelet’s top domestic affairs advisor told the
Ambassador October 14 that "rainy day" policies implemented
by the President had positioned Chile well to weather the
current global financial downturn. Bachelet’s standing with
the Chilean public had also been enhanced by her good showing
in recent international fora, including UNGA in September,
and in promoting UNASUR’s intervention in the Bolivian
crisis. October 2008 municipal elections would likely show
Bachelet’s governing Concertacion coalition losing some
ground, but not enough to jeopardize its ability to hold on
to power in 2009 presidential elections. End summary.

2. (U) The Ambassador, joined by E/Pol Counselor, met with
Francisco Diaz, President Bachelet’s senior domestic
political affairs advisor, to discuss upcoming nationwide
municipal level elections (widely considered a harbinger for
next year’s presidential and congressional elections), as
well as Diaz’s views on the ongoing global financial crisis.


Shelter From the Storm


3. (C) After the Ambassador noted, as reported ref A, that
Chile seemed to be managing well the fallout from the
financial crisis, Diaz replied the GOC continued to monitor
the situation very closely and still worried about a possible
uptick in unemployment, its greatest concern. So far, he
continued, while there has been little job creation,
thankfully there also has been no noticeable decrease in jobs
("unlike during the 1999-2000 Asian crisis"). The crisis
was not resulting in increased bankruptcies, and while some
new investment seemed to be on hold, projects underway
appeared unaffected, including infrastructure and
construction projects. Small and medium business firms are
"holding steady." Inflation remained "under control."

4. (C) Diaz attributed Chile’s relative ability to withstand
the global downturn to Bachelet’s decision in 2006 to save
surpluses generated by then high copper prices, a step for
which she had been much criticized, "including by those
within her own party" who had wanted to see the money spent
on social programs. Now, Diaz said, her fiscal probity was
paying dividends. He noted that the GOC was able to finance,
for example, 200,000 new pensions despite the crisis, even
nearly doubling payments from CHP 38,000/m (USD 63) to CHP
75,000/m (USD 125).


Bachelet Riding High


5. (C) Diaz said that Bachelet’s poll numbers has been
steadily tracking upward, which he attributed both to
domestic successes (including the charismatic President’s
ability to connect with people during last month’s national
day celebrations) as well as increased and successful
appearances in international fora. Diaz, along with
international affairs advisor Marcos Robledo, had drafted
Bachelet’s well received September 2008 remarks at Harvard.
The President’s emergency convocation in Santiago of UNASUR
heads of state (ref B) to deal with the Bolivia crisis had
also burnished her leadership credentials and would pay an
additional dividend to the governing coalition Concertacion
in the upcoming municipal elections.

6. (C) Diaz predicted that while Concertacion might lose a
few mayoralties nationwide in the October 26 municipal
elections, it would hold on to most, if not all of the
so-called "emblematic" offices in major cities. He thought
the opposition center-right Alianza could chip 3-4 percent
off of Concertacion’s 10 point overall margin in the 2006
municipal elections, but this could still be construed as a
victory by Concertacion. Diaz conceded the Ambassador’s
observation that Alianza might paint it otherwise, and that
the election would be "won or lost" in the media analysis

afterwards. Diaz nonetheless sounded pleased, saying that he
was personally involved in the campaigns of several young
candidates in the Santiago region who he believed would do
surprisingly well.

7. (C) E/Pol Counselor asked if the on again/off again
candidacy for the presidency of former president Ricardo
Lagos (who in the past two weeks has issued conflicting
statements about his availability) was problematic for the
Concertacion. Diaz said Bachelet would back a sole,
consensus candidate. In his view, Lagos would give
Concertacion heavyweights Jose Miguel Insulza ("my
candidate," said the Socialist Diaz) or Eduardo Frei
(Christian Democrat) six to eight months to "define
themselves." But if March 2009 comes along and Lagos remains
the only candidate in the polls seemingly capable of
defeating likely Alianza candidate Sebastian Pinera, then
that fact will "change minds" within Concertacion.


Comment


8. (C) Bachelet had been written off months ago by many
commentators as a "lame duck," ineffective, unsure of
herself, and likely to lead Concertacion to its first
electoral defeat since the return to democracy. With
approval ratings now in the high-forties and even low-fifties
(as opposed to mid-thirties in early 2008) she has rebounded
nicely, helped by her government’s ability to weather so far
the international financial crisis, as well as her own
ability to project an image of moderate statesmanship in the
Bolivian matter. It remains to be seen if that translates
into votes for Concertacion - whose own polling numbers
remain dismally low (as does the opposition’s) - in the 2008
and 2009 elections. End comment.
SIMONS