‘A Poor but Honest Country’: Corruption and Probity in Chile

Abstract

Chile has a long record of public probity, representing an exception in Latin America. It goes back to the late colonial period when the country was ruled by relatively efficient and honest governors. During the nineteenth century, Chile built up a solid state and a stable political system, based on the rule of law. Chileans have been ever since aware of the exceptionality of their country in terms of the strength of their political institutions and the scrupulousness of their rulers. This article shows the historical evolution of public probity in Chile, emphasizing the ways several governments have dealt with the corruption issue since democratic restoration in 1990.

Keywords

Chile legalist tradition public probity anti-corruption policies transparency

Introduction

The Chilean writer Marco Antonio de la Parra once defined Chile as being “a poor but honest country.” In his opinion, the existence of public probity constituted one of the most salient features of this South American nation. Chile possesses a long history of having relatively low levels of corruption and a political class which has shown high standards of probity. This fact has put this country in an almost exceptional position within the Latin American scene. This has been endorsed by a series of international studies by Transparency International, the World Bank, Latinobarómetro, and other institutions which year after year indicate Chile as the country with by far the lowest level of corruption in Latin America.

Perhaps for this reason, studies on corruption in Chile are still very rare as only a small number of local scholars have systematically paid attention to this phenomenon. The same is valid for the studies done by foreign scholars on corruption in Latin America who have been mainly interested in exploring countries with notoriously high levels of corruption, such as, Mexico, Venezuela, Bolivia, and Argentina (cf. Morris & Blake, 2010). So time and again, the analysis of the rather deviant Chilean case has been avoided.

The aim of this article is twofold. First, to provide some historical evidence of Chile’s long history of public probity, offering some possible explanations for this singular pattern. Second, to explore the main challenges Chile has faced since democratic restoration in 1990 in the field of public probity, and a series of measures taken by the democratic governments to maintain high levels of public probity in the country.

Public Probity in Chile: Historical Background

Most references about the low levels of corruption existing in Chile refer to the situation existing in the country since democratic restoration in 1990. This is partly the result of the emergence in the last 25 years of several international research institutions and programs exclusively dedicated to the comparative study of corruption in the world. One of the questions which has been seldom explored is when and under which particular conditions this exceptional position of low levels of corruption in Chile originated. It is not my intention to provide in this section a complete historical analysis. I will just mention a series of factors which with the passage of time seem to have helped to shape a culture of probity in the country.

The historic origins of public probity in Chile can be found in the late colonial period. Chile was one of the most remote and poorest colonies of the Spanish empire. The relative absence of gold, the permanent state of war with the indigenous Mapuche people, cold winters, and the periodic earthquakes made this territory not the most attractive place to be for ambitious Spanish wealth seekers. This prevented the emergence of a “resource curse” in Chile, that from the very beginning profoundly affected public life in the richest colonial centers like Peru and Mexico. In contrast, colonial life in Chile was relatively sober and austere, and the standards of living of the local elite were much lower than in many other places in Spanish America (Castedo, 1954, p. 378).

What seems to be a decisive factor in generating and maintaining the culture of public probity in Chile has been the quality of the colonial governors and their administrative cadre (Barbier, 1972). Several historians, both national and foreign, stress the fact that during the late eighteenth century, until independence in the early nineteenth century, Chile was blessed with the presence of exceptionally efficient and honest colonial governors. As Galdames points out, all the governors Chile knew during the eighteenth century “were respectable and industrious men who always deserved not only the royal confidence, but also consideration from those they governed. … They carried out with skill and honesty the administrative and economic reforms ordered by the royal court” (1941, pp. 115–116). Loveman came to the same conclusion, “until 1808 the colony was governed by a succession of capable, professional administrators. … The last royal governors administered Chile with vigor and correctness’’ (2001, p. 98).

It is important to stress here that the local Creole elite developed very strong links with the late colonial bureaucracy. As Barbier establishes,

in Chile the elite married into families of officials and enticed the latter to reciprocate throughout the Bourbon period. Indeed, the increased size of the bureaucracy allowed elite families to increase their rate of marriage with the administrative cadres. The aristocrats of Santiago continued to enter the royal administration up to the time of independence. (1972, p. 434)

Thus, both the capable and honest government of the colonial governors and the increasing inclusion of the local elite into the colonial administration generated a scenario in which the Creole elite did not in fact have too many reasons to aspire for independence from Spain. As Collier concludes in his study on Chilean independence,

Chile was extremely fortunate in the quality of its late-colonial Governors. They were well liked by the creole aristocracy. … The policies pursued by these zealous colonial functionaries seem to have ensured a high degree of harmony between creole aspirations and the smooth running of the government. (1967, pp. 11–12)

Thus following independence, Chile possessed a local administrative elite who had assimilated the good practices of the late-colonial administrations, thereby providing a relative degree of continuity in the running of everyday state affairs.

Another critical factor in ensuring the continuation of having high levels of public probity was the early and solid consolidation of the Chilean state in the early nineteenth century. Following independence, most Latin American countries were involved in a vicious circle of civil wars and severe social and political convulsions, resulting in long periods of authoritarian rule. In most cases, this led to a constant struggle among local caudillos for controlling the governments and the spoils of power. This generated a scenario of permanent abuse of power, rampant corruption, and arbitrariness on the part of the political elites. Chile followed a different path. After a period of relative instability (1818–1829), Chile managed to establish exceptionally solid state institutions which guaranteed the rule of law, economic progress, and political stability. The conservative forces in power proclaimed in 1833 a solid Constitution which was firmly in force until 1925. It established a strong presidential rule which remained characteristic for the Chilean political system for most of the nineteenth century. Although the resulting regime was quite oligarchic in nature, with almost no room for political participation of the popular masses, it consolidated the rule of law and the establishment of a legalistic culture among the Chileans (Faúndez, 2007). The firm control of political power by the Santiago-based aristocratic elite, the relative submission of the popular sectors to this rule, and the lack of regional power contenders facilitated the consolidation of the state structures and the Chilean nation.

The fact that Chile enjoyed political and institutional order and stability, while most of the other Latin American countries were submerged in a situation of chaos and misgovernment, stimulated the idea of Chile’s exceptionalism. As Collier point out, already by the mid-1840s most Chileans were extremely aware and convinced of the idea that their nation was indeed different than the surrounding Latin American countries (Collier, 2003, pp. 167–172). As Burr points out,

Chileans became aware of the extraordinary contrast between their own law and order and the chaotic turbulence of their neighbors. The more the Chileans learned about others, the more convinced they became that they were unique among Spanish American peoples in being able properly to govern themselves and to make orderly social and material progress. (1965, p. 114)

This awareness among Chileans is still in place, and has historically constituted an important factor in consciously trying to maintain high levels of probity by both governments and opposition forces alike.

During the so-called “parliamentary republic” (1891–1925), Chile abandoned the path of strong presidentialism and embraced a system close to a parliamentary democracy. It has been argued that this period showed a moral decay of the nation. Authors such as Encina (1911) strongly criticized the weak and inefficient parliamentary regime and called for a stronger executive and the modernization of the state institutions. At the beginning of the twentieth century, the prestige of parliamentary democracy and the political class at large was indeed severely damaged. As Góngora concluded about that period, “Parliamentary rule was completely discredited in moral, intellectual, and political terms” (1981, p. 130). The many references to the “moral decadence” of the country during that period, however, were not directly connected to an increase of corruption among the political class. Chile continued to be the same country with relatively high levels of probity. Most of the criticism on this period was related to the inability of the socially oligarchic sectors in power to produce the needed social and economic reforms to face the new challenges of the twentieth century. Also the expansion of state agencies since the early twentieth century enlarged the number of public officials considerably. This created great concern among the public that saw increasing bureaucratization as a possible source of corruption. In addition to this, since the late nineteenth century until the late 1950s, the use of bribery (cohecho) by political parties to attract votes, particularly at local and parliamentary elections, became more visible despite the rejection produced in the public opinion (Valenzuela, 1977). As Rehren (2000, p. 138) points out, from the 1930s onwards a new social and political situation emerged in the country, stimulating the emergence of incipient corruptive practices. The political party system became much more competitive. This led to the incorporation of new social actors into national politics through political patronage. So, electoral bribery was directly connected to political mobilization. This situation lasted until 1958 when a new electoral law was introduced, making electoral bribery much more difficult to be carried out.

The Technocratization of the Chilean State

From the Ibáñez government (1927–1931) onward, Chile began to adopt a series of profound institutional and administrative reforms aiming at achieving higher levels of efficiency and probity within the state. The creation of the National Comptroller Agency (Contraloría General de la República) in 1927 represented a decision of utmost importance to guarantee low levels of corruption among state institutions ever since. With the establishment of the Contraloría Chile followed one of the many recommendations made by a team of American financial experts, led by Professor Edwin W. Kemmerer from Princeton University. Along with this, the Chilean government also implemented profound reforms of the country’s monetary, banking, and fiscal system (Drake, 1989).

During the Ibáñez government, a large group of young engineers, with no direct links with the traditional political parties, was recruited in managerial positions at a series of state institutions. As Loveman states, “technicians and middle class professionals staffed growing ministries and public agencies previously manned overwhelmingly through political patronage by the traditional parties” (2001, p. 184). It important to stress here that this young generation of highly trained state administrators were able to maintain their key positions within the most important state agencies until the late 1950s, providing a high degree of administrative continuity as well as high standards of public probity. Both the honesty and efficiency characterizing this group of professionals working in public administration were recognized by all political forces in the country. As Clarence H. Haring states, the Ibáñez government

made a clean sweep of the ministry of finance and introduced an entirely new personnel. Virtually all of the latter were engineers, as contrasted with the lawyer element which previously monopolized such offices. They were inexperienced but … they have proved to be an honest, intelligent, and progressive group of men. (Haring, 1931, p. 23)

Although Ibáñez came under fire due to the increasing authoritarian nature his government adopted, he and his closest associates never received accusations about personal enrichment or lack of probity. This was also the impression of many foreign observers. In a letter dated January 1928, the British ambassador to Chile wrote to his prime minister characterizing Ibáñez in the following way,

He is poor and his house is a model of Spartan simplicity. I have never heard a charge of corruption or venality against him. I believe he himself is inspired merely with his desire to serve his country to the best of his ability and his lights. (quoted in Blackmore, 1993, p. 78)

The Ibáñez government collapsed in 1931, primarily as a result of the dramatic effects of the Great Depression on the Chilean economy. By the mid-1930s, and after a short period of political and social turmoil, Chile regained the path of political stability and democratic institutionalism. As I have argued elsewhere (Silva, 2008, pp. 84–91), the consolidation of state technocracy in Chile since the late 1930s can be seen as the result of a fragile equilibrium of political forces. While the center-left reformist forces were able to control the government, they were not strong enough to impose their own agenda on the rest of the country. On the other hand, the right-wing conservative forces since the mid-1920s no longer had control of executive power, but they were still able to block most governmental initiatives. In this manner, the technocratic ascendancy since the late 1930s in Chile was, in my view, a result of a political stalemate and a subsequent political compromise (the so-called Estado de Compromiso). In this scenario, the strong presence of technocrats in state agencies since the 1930s must be seen as the establishment of a kind of “demilitarized zone” between these contending sociopolitical forces to allow the smooth functioning of the Chilean state. During the 1930s and 1940s, all Chilean political forces at that time had, in general, a good opinion about these professional managers. They regarded them as honest and competent public servants who in principle did not represent any specific political current. This was also the opinion of left-wing parties and the labor movement, who never criticized the technocrats’ presence at the highest echelons of state enterprises and agencies.

After the electoral victory of the center-left Popular Front coalition in 1938, the industrialization of the country became the main national goal. For this purpose, the Chilean Development Corporation (CORFO) was established a year later. From its creation until the military coup in 1973, CORFO was decisive enough to create hundreds of new industrial activities, and soon became the main planning agency for the country’s global economic development (Muñoz & Arriagada, 1977). It is important to stress that, due to the huge amount of financial resources administered by CORFO, this state agency potentially constituted a great risk of public corruption. This generated an extensive discussion in the parliament. While the Popular Front forces wanted to strengthen the role of the president and his economic ministers in CORFO’s decision-making process, the right-wing conservative forces unsuccessfully attempted to put CORFO under a close parliamentary scrutiny. In the end, CORFO obtained broad autonomy from the government as well as from the parliament and the entrepreneurial groups. As Muñoz and Arriagada point out,

The planning and implementation of the developmental projects were left in the exclusive hands of technicians and experts. They possessed full autonomy from political circles and took their decisions on the basis of scientific considerations. According to the government, this was the only way to guarantee the success of CORFO. For this reason, special attention was paid to the professional credentials of those in charge of the planning activities. (1977, p. 28)

This conscious decision to avoid the politicization and possible emergence of clientelistic practices within CORFO not only facilitated the smooth administration of the industrialization efforts but also secured high levels of probity within the state apparatus.

In the period 1939–1952, the center-leftist Radical Party fulfilled a pivotal position in the government, and was often accused of corruptive practices as it notoriously placed a significant number of its militants in key positions at ministries and other state agencies. However, during that period, no significant cases of bribery or illicit enrichment have been reported by political analysts of the time (Orellana, 2004, p. 5).

During the Frei (1964–1970) and the Allende (1970–1973) governments, Chile entered into a turbulent political period. Both administrations were engaged in introducing profound transformations in the Chilean economy and society. The country’s traditional political stability gave way to a scenario of increasing polarization and political confrontation, culminating in the military coup of September 11, 1973. Morever, the public administration became politicized as supporters of the Frei and the Allende administrations massively colonized several state agencies. During the Allende government, many industries, banks, and large farms were expropriated and came under the supervision of state managers. But despite the improvised and sometimes utterly chaotic manner in which the state agencies were managed during the Allende government, public probity was not seriously damaged. In addition, the legal system and supervisory institutions, such as the Contraloría General, maintained their autonomy and authority. And finally, both the right-wing opposition forces at the parliament and the mass media (largely in the hands of the opposition) also played a formidable supervisory role in the Allende government’s administrative performance. However, immediately after the coup the military authorities accused the leaders of the deposed government of unbecoming conduct and corruption. However, not even a single case of corruption by the leaders of the Unidad Popular government was proved by the judicial system in the following years.

Pinochet and the Assault on Public Probity

During the Pinochet dictatorship, many of the check-and-balance mechanisms to supervise the performance of the government were abruptly eliminated or neutralized. Even institutions such as the Contraloría General and the judicial system proved unable to maintain their autonomy and authority vis-à-vis the new military rulers. This, along with with the prohibition and repression of any independent voice criticizing the regime’s public policies and performance, concealed the existence of corrupt practices by the new government for many years.

One corrupt practice established during the military regime was the payment of extra bonuses to top officials. The new authorities tried to attract senior managers from the private sector to the state agencies. Due to the relatively low salaries paid in public administration, many of them got amounts of money (sobresueldos), secretly and on a monthly basis, to compensate their salary losses as a result of their shift to a state job. These extra expenditures were paid from secret reserved funds existing in the national budget. The payment of sobresueldos to ministers and other top officials persisted following democratic restoration in 1990.

Some of the neoliberal reforms applied by the military government also facilitated the realization of illicit transactions. These reforms were directed to reinforce the role of the market in the Chilean economy and to reduce the functions of the state. For this purpose, the military regime privatized a large number of traditional state enterprises as well as those expropriated during the Unidad Popular government. The privatization process was carried out in a hurry and without a clear set of regulations. Many of these enterprises came into hands of the right-wing politicians, senior state officials, and businessmen with good links with the military government who often bought them at prices far below the market value. This process led to the emergence of large and very influential financial and industrial conglomerates (the so-called grupos económicos) who became one of the main beneficiaries of the military regime (Mönckeberg, 1991).

On the other hand, the application of neoliberal policies during the Pinochet government reduced the attractiveness of the public sector as a possible employer. The military regime drastically downsized the number of public employees and state agencies. Moreover, due to the prohibition of the political activities for 17 years, the political parties did not obtain access to the spoils of the state for a very long time, and were forced to learn to live without public funds. Along with this, the rapid expansion of the market sector and the job opportunities in the private sector convinced many Chileans that a career in the public sector was no longer a desirable goal. All these factors substantially reduced the rent-seeking behavior of strategic actors in Chile (Rehren, 2000; Thacker, 2009).

Pinochet became the only president in Chilean political history who visibly enriched himself during his period in office. During his 17 years in power, he bought many large properties in different parts of the country, valued at several million dollars. His government was also characterized by nepotism as he openly benefited the Pinochet clan. Several family members were appointed at the top positions of large enterprises in which they amassed large fortunes.

Another source of corruption during the Pinochet years was the secret arms deals. During the Pinochet government, military expenditures increased dramatically. A huge number of tanks, fighting jets, and warships were acquired abroad and most of the Chilean officers involved in those transactions received substantial bribes and commissions from foreign providers. During his regime, and motivated by the US weapon embargo against several South American military dictatorships, Chile managed to develop its own military industry. This led to the increasing export of Chilean defense material to many countries in the Third World. Most of those deals took place in total secrecy and became a source of personal enrichment for many high-ranking military men, including Pinochet himself.

Nevertheless, practically no information about public corruption during the Pinochet era reached public opinion. Only after democratic restoration in 1990, a series of corruption affairs involving military men, including the Pinochet family, were investigated by the Chilean judicial system.

For a long time, Pinochet had cultivated an official image of his government as being authoritarian, but honest. Many Chileans who supported his regime also wanted to believe that. In their eyes, and contrary to other military dictatorships in the region, the Chilean military government had been characterized by high standards of public probity. In 2004, however, a special commission of the US Senate discovered several secret bank accounts (containing more than 20 million dollars) owned by Pinochet at the Riggs Bank in Washington. This news had a devastating impact among many of his most loyal supporters in Chile. They had pardoned, and even justified, all the crimes and human rights abuses committed during his regime, but for many this news about the secret accounts marked a definitive point of break with the formal dictator.

Public Probity and Democracy in Chile

Following democratic restoration in 1990, most of the attention of the new authorities was concentrated on the maintenance of political stability and economic growth. Moreover, the political and social forces who had supported the former dictatorship maintained huge influence and a powerful representation in Congress. In addition, Pinochet himself remained commander in chief until 1998, following the regulations of the 1980 Constitution introduced during his rule. In this complex political scenario, the new democratic government was very cautious in the official treatment of sensitive issues related to the recent past, such as human rights abuses and the alleged corruption during the previous regime (Otano, 1995).

Nonetheless, the restoration of democracy brought back the full reactivation of the oversight institutions of the government’s performance, such as the Contraloría General, the judicial system, the parliament, the political parties, the mass media, private research institutes, and a vibrant nongovernmental organization (NGO) community.

Public Probity under the Aylwin Government

President Patricio Aylwin (1990–1994) faced severe tensions with the military due to his firm determination to establish the truth about the atrocities committed by the former military regime. However, the most serious tensions with the army were generated by cases of corruption in which the Pinochet family was involved. This made it clear that the military had linked its own institutional fate with General Pinochet. So the first confrontation between the government and military leaders broke out following an investigation by a parliamentary commission of a series of irregular financial transactions (the so-called “pinocheques”) conducted by one of Pinochet’s sons in the late 1980s that involved the army and some state institutions. On the evening of December 19, 1990, Pinochet suddenly decreed a state of highest alert and ordered the entire military personnel to return to their barracks in the entire country, without consultation with the government. With this show of force, Pinochet sent a strong message to both the government and the judicial system not to proceed with that investigation (Rehren, 1996).

The second major confrontation occurred in May 1993 when Pinochet again ordered the army to go back to the barracks, while President Aylwin was on an official trip around Europe. This action (which lasted for five days) was accompanied by a high-profile meeting of the entire high command of the army (in full combat outfit) at the building of the armed forces, in front of the Moneda presidential palace. Outside the building, some one hundred combat-ready black beret elite troops (boinas negras) were deployed with the backing of armored vehicles. Chilean vice president Enrique Krauss, who was in charge of the handling of this crisis (known as the boinazo), ordered the realization of a series of urgent meetings between top officials of the government and the army to ease the tensions. The direct motive of this crisis was the reopening of the investigation to the “checks case” at the parliament, this time directly linking General Pinochet to this financial scandal. When Aylwin came back to the country, he publicly rebuked General Pinochet. In the end, however, the government asked the parliamentary commission in charge of the “checks case” not to involve General Pinochet in their final report (Silva, 2002).

No significant cases of public corruption were reported during the first Concertación government. Nevertheless, at the very end of the Aylwin administration, a scandal occurred at CODELCO, the National Copper Corporation, which generates and administers a huge amount of financial resources. A CODELCO copper seller in future markets had conducted a series of speculative operations in secrecy which finally provoked the loss of more than US$ 200 million to this state company. He was convicted to 3 years in jail. In the end, however, it was not totally clear if this was just the result of a one-man action, or if more CODELCO officials were involved. This single case alerted the mass media and the public about the need to introduce tighter controls on the use of public financial resources. This incident however did not affect the popularity of the Aylwin administration. In historical retrospective, Aylwin is still regarded by most Chileans as an honest president who did not take advantage of his position.

The Anti-corruption Agenda under the Frei Administration

During the Frei government (1994–2000), the modernization of the state and the public administration in general were presented as one of the executive’s top priorities. The CODELCO case generated a broad political debate on public probity and Frei quickly adopted a series of measures to guarantee higher levels of transparency and accountability at all levels of the state apparatus. He established a high-level National Commission on Public Probity (Comisión Nacional de Ética Pública). This commission was formed by the minister secretary general of the presidency, the presidents of the senate, the Chamber of Deputies, the Supreme Court, the Council of Defense of the State, the Comptroller General of the Republic, and some respected personalities linked to the ruling coalition and the opposition forces. They were commissioned to produce a concrete agenda including specific measures to be adopted in order to improve the quality of public probity. This Commission finally presented a report with 41 measures.

As Muñoz indicates, one of the main merits of this initiative was to place the corruption issue as being a national affair concerning everyone. It included figures of the most important political sectors in order to reinsure a broad support for the probity agenda emerging from it. In addition to this, it possessed a marked preventive nature as Chile was not experiencing a situation of increasing corruption or the like at that moment (2008, p. 117). Several of the measures proposed by the Commission were adopted and have indeed substantially strengthened the mechanisms of control and the transparency of functioning of the state agencies ever since.

For instance, the principles of probity and transparency were introduced in the general law which regulates the functioning of the public administration. State agencies are obliged to inform the community about the procedures which lead to a formal decision, as well as to publish all the documents related to that decision. Citizens also obtained the right to demand access to particular documents and information from the public administration, which have to be provided within a short period of time. Since this new possibility was introduced, thousands of requests have been put forward by journalists, NGOs, political parties, and particularly by concerned citizens. This mechanism has certainly constituted a strong incentive for public officials to strictly follow the right procedures in their decisions. Last but not least, a series of public probity offences became explicitly established in the law regulating the public administration, which until then were not officially considered illegal acts. These include, among others, the traffic of influence, misuse of privileged information, and a clear specification of situations considered as acts of bribery.

Corruption Scandals under the Lagos Presidency

During the third government of the Concertación coalition (2000–2006), a series of corruption scandals emerged involving high-ranking public officials and members of political parties in power. In October 2002, it became known that several members of the Lagos government were linked to a bribery scandal (the so-called caso coimas). This included a member of the parliament, the deputy minister of public works and transport (MOP), and other officials of that ministry. They had asked a businessman for a bribery payment to obtain a license to operate a plant for the regular inspection of vehicles at Rancagua. As a result, several top officials had to face justice. The same judicial investigation led to an even larger scandal (the so-called “MOP-gate”) involving the same ministry. It established a series of irregular payments by this ministry to several subcontractors for activities which were fictitious. That money later flew back to this ministry and was used to pay extra bonuses (sobresueldos) to a large group of top officials, including the minister, deputy minister, and chiefs of several departments. The investigation made clear the broad extent of this corrupt practice under the Lagos government. Several Lagos officials were prosecuted, including the former minister for public works. The “MOP-gate” affair dominated the public debate for months and asserted a big political blow to the prestige of the government and President Lagos. In addition, this scandal provided a great opportunity for the right-wing opposition to exert pressure on the Lagos government in order to force him to adopt a series of reforms. Following a historic meeting between President Lagos and the leader of the largest opposition party, Pablo Longueira, the establishment of a common legislative pro-probity agenda was announced.

One of the direct results of the government–opposition pact was the creation of the Council for High Public Management (Consejo de Alta Dirección Pública). This Council established the procedures and supervised the election of an increasing number of top officials at the public administration, on the sole basis of professional expertise, experience, and personal merits. The idea is to gradually reduce the number of job positions which had been filled in with people proposed directly by the president and the government and hence, replaced every four years as a new government is installed. In this new process, an open competition takes place on the basis of clear job specifications about the specific professional expertise the candidates have to possess. Those who passed this procedure to become top public officials will continue in their position, providing quality and long-term stability to the management of state agencies.

These scandals also made clear that the lack of legislation about the finances of political parties and the costs of electoral campaigns generated all kinds of corrupt practices to obtain financial resources from both the state agencies and the private sector. For this reason, the government–opposition pact also agreed to send a law proposal to the parliament to regulate the expenditures of the political parties during electoral campaigns. This resulted in the adoption of the law 19.884 “On Transparency, Limits and Control of Electoral Expenditures” of August 2003, which was applied for the first time at the presidential and parliamentary elections of 2005. It establishes limits of private donations to political parties and candidates as well as certain tax benefits for the donors. In order to prevent the co-optation of candidates by donors, this legal regulation prohibited the direct payment of these donations to the parties and candidates. Instead, a blind mechanism was introduced, by which all the donations have to go to the Chilean Electoral System (SERVEL), which later distributes the resources to the beneficiaries. This occurs in tranches, which do not totally correspond with the donated resources, in order to disguise the origin of the money. Finally, following the electoral contest, all the political parties and candidates involved have to provide a very detailed account of all the election expenditures to SERVEL, including official payment receipts. If SERVEL does not accept certain receipts, the involved political parties and candidates have to return the contested expenditure to the state and pay high fines (UNDP, 2014, pp. 411–413).

Finally, during the Lagos government, the state also introduced an online mechanism (“Chilecompra”) which shows all the acquisitions being done by public institutions. It can go from big items to a set of seats for a meeting room. It also includes the followed tender specifications, and the final price paid by the public office under scrutiny. This strict mechanism of purchases done by the state has also become a very powerful dissuasive tool to prevent irregularities and cronyism among those responsible for acquisitions.

Most of the scandals that erupted during the Lagos administration were directly or indirectly related to the use of public resources coming from state agencies to illegally finance political campaigns during elections (Orellana, 2007). Chile, however, was still not in the grasp of cases of political corruption, exclusively motivated by the purpose of personal enrichment. In addition, most of these scandals implied relatively low amounts of money, compared with the average corruption scandals taking place in other Latin American countries. Nonetheless, opinion polls continue to show that these scandals have severely eroded the already questioned prestige of the parties, and the political class at large, among the Chilean population.

The Bachelet Government and the Probity Issue

During the fourth government of the Concertación coalition (2006–2010), the executives continued to be plagued by scandals related to the illicit use of public funds for electoral finance. This time, however, the right-wing opposition was no longer disposed to help the government to find a common political and legislative solution. Indeed, during the Bachelet government, the opposition and the conservative mass media systematically attacked the government on probity issues and insisted on the existence of a broad network of corruption within the executive’s inner circle. Leaders of Renovación Nacional (RN) and the Unión Democrática Independiente (UDI) repeated time and again that the Concertación coalition has been in power too long, and that the corruption scandals were a reflection of that (Allamand, 2007). This campaign to demolish the ethical reputation of the Concertación coalition had several consequences. It not only stimulated the departure of moderate sectors of the electorate to the right-wing opposition parties but also strengthened radical sectors of the left who claimed that the days of the Concertación coalition were numbered.

The inability of the Bachelet government to formulate a strong pro-probity agenda also created mounting tensions within the governmental coalition itself. A series of influential figures in Concertación began to openly criticize the practice of using public resources to finance the activities of the political parties of the ruling coalition. In December 2006, Edgardo Boeninger, a former minister and eminence grise within Concertación, openly recognized in a newspaper interview that this coalition systematically made use of reserved public funds to finance all kinds of political activities of the governmental political parties. He also disclosed that the ideological justification was that the right-wing political parties in Chile were generously financed by the business sector, while the center-left parties of the government could not count on external sponsors. Thus, as long as the reserved public resources were exclusively used for party activities and not for personal enrichment, no one within the coalition had major objections to continue with this practice. Boeninger rejected that justification and declared the use of those public resources as reproachable (El Mercurio, December 3, 2006). These declarations were reinforced in the following weeks by other prominent Concertación leaders, such as Jorge Schaulsohn and Gonzalo Martner. However, other sectors of the coalition disqualified these disclosures, calling for the expulsion of these whistle-blowers from their parties.

During the Bachelet administration, a series of scandals about price collusion between leading firms of poultry production and among several pharmacy chains also emerged. This generated huge discontent among the Chilean public. Although these cases occurred in the private sector, the government received most of the criticism for not being able to prevent oligopolistic practices. Many people concluded that the existence of corrupt practices had become generalized, both in the public and private spheres. As studies show, Chileans have by far the lowest degree of tolerance in Latin America for corrupt practices at the public sector, such as the payment of bribes (UNDP, 2014, p. 424).

The probity issue and the internal struggles it produced within the Concertación became decisive for the future of this political coalition. During the four governments of the Concertación coalition (1990–2000), the Chilean economy and society experienced a rapid process of modernization and increasing levels of welfare. Exports were booming while the levels of poverty and unemployment in the country were dramatically reduced. Until 2006, the Chilean electorate had expressed its satisfaction so far with the general situation of the country by electing four Concertación presidents in a row.

Under these circumstances, the right-wing opposition and the conservative media had a difficult job to do. It was not easy to convincingly criticize the government’s positive performance in the economic, political, and social fields. For that reason, the strategy of the opposition concentrated on the question of probity of the Concertación governments. In this manner, during the rest of the Bachelet administration, both the right-wing parties and the conservative media continued denouncing all types of alleged mismanagements in the running of state agencies and municipalities under the control of the Concertación parties (Brinegar, 2007). The opposition strategy proved successful by the final days of the Bachelet administration, despite the fact that Chile was recognized worldwide to possess, by far, the highest levels of public probity in Latin America.

The Piñera Government: The Government of the Best?

During the presidential elections of 2009, the candidate of the right-wing political parties, Sebastián Piñera, made the probity issue one of the main topics of his campaign. He accused the Concertación governments of having established a corrupt political party quota system for distributing and controlling the jobs available in public administration. In his government program he promised:

to put an end to the political quota system (cuoteo político). The state will not represent any longer a kind of spoils of war to be captured by agents of political parties. The public jobs will be occupied by people with professional capacity and experience, and not as a result of political favours or due to the protection of a political godfather. … We will ask no one for his membership of a certain political party. But we will ask everyone to possess a curriculum showing excellence, honesty and dedication to public service. We will rule with the best. (Programa, 2010: 6).

Piñera promised “a new way of governing” by bringing more efficiency in the management of the state. Following his victory in the second round of the presidential contest in January 2010, he rapidly initiated the search for his new cabinet. His actions presaged the end of the high degree of relative autonomy usually possessed by senior government officials vis-à-vis the interests of the private sector. Piñera mainly chose people having a business profile similar to his own. So most of those appointed as ministers and other high-ranking officials were well-known businessmen or senior managers of large industrial and commercial conglomerates. The close relationship of the members of the cabinet with the business world automatically generated a problem which had been practically absent in Chile since the restoration of democracy in 1990, namely, a series of possible conflicts of interest between their new public function and their strong connections with the business world. This occurred at the level of ministers as well as other key positions, such as undersecretaries, regional and provincial governors, and managers of large public companies. For example, Alfredo Moreno, the Minister of Foreign Affairs, had been Director of Falabella, a huge department store which also has operations in the neighboring countries, such as Argentina and Peru. As Chile has rather complicated relationships with these countries, many questioned if the appointment of Moreno was going to influence his policy toward both the countries.

Although most of them had resigned from their business activities immediately after their official appointments, it was obvious that their close links with the private sector were not going to disappear overnight. President Piñera himself faced the same problem as he still was the owner of several enterprises and possessed interests in a large number of companies. Following his installation, Piñera delayed the selling of his interests in many big companies. This brought him much criticism not only from the Concertación opposition but also from important figures of the Chilean political right.

The Piñera government also proved not to have been sufficiently rigorous in selecting the individuals in the top positions. The media and the Concertación opposition successfully questioned the probity of several individuals who Piñera had proposed for the function of governors of several provinces (as it was the case in the provinces of Los Andes, Cautín, and Bío-Bío). Many of them had committed violations, such as expending checks without funds and having huge tax debts. This constituted a serious blow for the government as several of these individuals were forced to withdraw their candidature or sometimes, to resign only after hours or days of having been appointed.

Following 20 years of Concertación rule, the lack of governmental experience of Piñera and his cabinet became more than evident as they have shown little knowledge about many administrative practices and procedures. So in the first month in power, the new authorities committed many mistakes, and even blunders, which have been criticized not only by the opposition but also by their own right-wing constituency. All these events practically demolished Piñera’s electoral promise to deliver an efficient and effective government and to put an end to the alleged corrupt practices in the government.

For example, Piñera also confronted the emergence of a strong student movement which protested against the commercial nature of the Chilean higher education system and the generation of huge profits at many private universities. They demanded free access, better quality, and more equity at all levels. The permanent protests of the student movement severely challenged the legitimacy of the government. Time and again, the close links existing between the members of his cabinet and the private sector became clear. This was the case of his minister of education, Joaquín Lavin, who at the moment of his appointment was one of the owners of the Universidad del Desarrollo, an elite private university. Although he sold his shares at the university following his nomination, the student movement never accepted him as a valid interlocutor due to his close connection to the private sector. This later led to his resignation.

The political forces of the former Concertación fully supported the student movement and adopted the conflict of interest issue in the Piñera government as their main weapon to oppose his administration. It is important to stress here, however, that during the Piñera government the conflict of interest was mainly potential. In practice, no noticeable cases occurred in which a member of his cabinet or other top official took decisions that clearly benefited certain groups in the society because of their close links to them.

At the end of the Piñera administration, the interrelationships between business and politics became profoundly condemned by the Chilean electorate, despite the excellent economic performance achieved by his government, following the pattern of previous governments which had not been able to maintain high standards of probity.

Bachelet II and the PENTA and CAVAL Scandals

In the general elections of December 2013, Michelle Bachelet won a presidential contest for the second time, this time ahead of the “New Majority” coalition, including the parties which participated in the former Concertación and the Communist Party. In its electoral program (Chile para Todos), emphasis was placed on the achievement of larger degrees of equity within the Chilean society, announcing the introduction of profound reforms in the education and tax systems. Very little attention was paid to issues concerning public probity in the government program. In a brief section entitled “probity and transparency,” the New Majority promised “to pay special attention to the existence of possible conflict of interest at the appointment of public authorities,” implicitly referring to the Piñera administration. The program also announced the adoption of new regulations to avoid possible conflicts of interest of those who, after having fulfilled public functions, later accepted a job in the private sector. In addition, a tougher regulation was promised for the sworn declaration of assets and interests which all public authorities are required to sign before being appointed at their posts. And finally, the New Majority announced its intention to strengthen the mechanisms of internal accountancy of the government and to regulate lobbying.

Following her inauguration in March 2014, President Bachelet had to face increasing opposition to her plans from the right wing to radically transform the education system, introduce a new taxation regulation, and to change the country’s Constitution. So for the first time in many years, the probity issue was almost absent in the main political discussions between the government and the opposition. But the tranquility on this front was suddenly interrupted in October 2014 as an investigation conducted by the National Tax Service (SII) exposed the illicit operations in financing electoral campaigns by PENTA, a powerful business conglomerate with interests in banking, health care, and real estate.

The SII investigation demonstrated that PENTA had given a huge amount of money to candidates of the right-wing Independent Democratic Union (UDI) to finance their senatorial campaigns during the 2013 general elections. It involved several influential politicians such as Senators Ena Von Baer and Iván Moreira. In the following months, new information appeared about the huge extension of the illegal operation, including new names of politicians who had received money from the business conglomerate for their campaigns.

The reaction of the Bachelet government has been quite formal and legalistic. According to the government’s spokesman, this was a matter to be investigated by the judicial system, and only after the legal authorities have reached a conclusion, would the government express its position. In fact, the government was visibly preoccupied about the fact that this scandal could reach the politicians from the New Majority as well. Indeed, over time well-known figures from the Concertación such as Andrés Velasco (former minister of finance at the first Bachelet government) and several Christian Democratic politicians have been related, in one way or another, to the PENTA scandal. This major scandal has generated further interest about the relations between the business world and politics, and the desirability to put an end to the excessive influence entrepreneurial groups exercise on the financing of political activities (Navia, 2015a).

The right-wing parties, National Renovation (RN) and particularly the UDI, have paid the highest political price for this scandal, as most of the politicians involved came from the latter. The UDI leaders have also received severe criticism from within the party for not having recognized their responsibility in this illicit act from the very beginning. Instead, they decided to wait for the results of the investigation carried out by the judicial system. By this, the UDI leaders attempted to reduce the scandal to a mere illegal activity of certain party members, and not as an expression of a generalized problem affecting the entire party.

Many among the New Majority coalition did not get time to celebrate this tremendous blow for the right-wing opposition. In February 2015, the weekly magazine Qué Pasa published an article on a controversial real estate deal involving President Bachelet’s son, Sebastián Dávalos (Navia, 2015b). She had personally appointed Dávalos at the presidential palace to carry out tasks normally done by the first lady. The article shows that only a day after Bachelet won a second term in office, her son and his wife Natalia Compagnon received a loan of US$ 10 million from the Banco de Chile. This deal was through CAVAL, a company half-owned by Bachelet’s daughter-in-law. This money was used to buy and to resell a large property, generating a US$ 5 million profit for CAVAL. This news generated a huge scandal which dominated the news and the public debate in Chile for months. This was reported by the press and the social media as a clear case of “influence trafficking.”

The Bachelet government conducted crisis management very poorly. To begin with, the government spokesman initially attempted to downgrade the issue. It stated that the transaction was just a business involving two private parties. Bachelet herself continued with her summer vacation in southern Chile, remaining totally disconnected from the press for weeks. Also the main leaders of the New Majority political parties avoided the press to evade expressing their opinion about the CAVAL scandal. In the meantime, it had become clear that the CAVAL scandal was rapidly affecting the popularity of the president. When some influential public figures from the former Concertación publicly asked Dávalos to resign, his position became unsustainable. He finally resigned from his position and from the Socialist Party; he and his wife are currently being investigated by the judicial system.

Bachelet held a short press conference to talk about the matter. She did not openly disapprove Dávalos’ conduct because she denied knowing anything about the bank loan and the real estate deal. Most Chileans saw in her intervention a protective mother, rather than a president choosing the interests of the country above her own personal interests. The scandal led to her approval ratings abruptly descending from 40 to 31 percent.

This scandal has also had a devastating impact on the entire credibility of the New Majority, damaging its ability to proceed with ambitious reforms aimed to increase the levels of equity in the country.

Conclusions

Chile has a long history of public probity, going back to the colonial administrations in the late eighteenth century. This tradition of probity among the political leaders continued, following independence of Spain in the early nineteenth century. The early and successful consolidation of the Chilean state and its ability of maintaining the rule of law and political stability were certainly determining factors in protecting this country from the emergence of widespread corruption, as was the case in most parts of Latin America. The Chilean people have always been aware of the relatively high quality of the members of the country’s political class, and have certainly been proud about that. This has generated, with the passage of time, a distinctive culture of probity among public officials who are conscious about the existence of a long tradition and distinctiveness vis-à-vis other Latin American nations they want to preserve.

Chile also possesses a strong legalistic culture by which laws and legal rules are generally obeyed by the political class and the rest of the population. In this manner, when corrupt practices are detected at state agencies, all the actors involved almost automatically privilege the action of the judicial system to deal with the problem and to sanction those who have committed a delict. With the exception of the Pinochet period, the existence of a strong and independent judicial system and efficient controlling state agencies such as the Contraloría General have very much contributed in maintaining high standards of probity in the country.

Chilean political culture has historically detested the phenomenon of populism, which has been so recurrent in other Latin American countries. The existence of a solid system of doctrinaire political parties has strongly institutionalized the access of people to positions of power, avoiding the appearance of personalist and populistic caudillo leaderships. By this, the Chilean governments have successfully avoided the generation of open clientelist relations between the ruling parties and the masses, which elsewhere have often led to corrupt practices.

To sum up, the culture of public probity in Chile is the product of a series of factors that have converged together. This includes the existence of a proper colonial administration, strong state institutions being able to guarantee the rule of law, the inexistence of regionalism, a socially homogenous and united elite, a popular tradition of respect for rules and laws, and a long democratic tradition allowing the existence of functional check and balances.

The military regime led by General Augusto Pinochet constituted a painful disruption in this long-standing tradition of having honest presidents and political leaders. The proscription of the controlling role of the parliament and the political parties in general, and the elimination of a free press, allowed the emergence of very corrupt practices in the inner circle of power, in secret.

Following the democratic restoration in 1990, the four governments of the Concertación coalition (1990–2010) dedicated a lot of attention to reinstate high levels of public probity in public administration. Despite these efforts, each administration has confronted corruption scandals. Most of the scandals, however, have been directly or indirectly related to a single issue: the financing of political parties and their activities (particularly electoral campaigns). In this manner, most corrupt practices at the government level are not related to personal enrichment, as is so often the case in the rest of Latin America. This is the reason why the scandal about the personal enrichment of President Bachelet’s son has had such deep repercussions in the country as Chileans are not accustomed to this kind of corruption.

The fears of becoming a corrupt country explain the overreactions of the Chilean public opinion on specific scandals involving public officials, at times. Chileans have a very low degree of tolerance for corruption and at the first signal that someone in the government or the opposition has been engaged in a corrupt practice, they severely punish the parties involved. This explains why even governments that have had a very successful performance in the economic and social fields lose the support of the electorate due to a corruption scandal.

The accusations of alleged corrupt practices by the government have become a constant political weapon used by the forces of the opposition to inflict some damage on their opponents. In the long run, however, this has not only led to the achievement of the pursued goal but also damaged the image of the entire political class in the eyes of the Chilean electorate. Today, Chileans indeed have an extremely poor opinion of their political leaders, even though the latter still show the highest standards of probity within Latin America.

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