Chile’s Moment in the Global Spotlight Goes Horribly Wrong
Chile Signals Turmoil Is Here to Stay After Canceling Summits
(Bloomberg) -- Chile’s decision to pull out of hosting two global conferences after the worst civil unrest in a generation sends a clear message to the world -- don’t expect the crisis to end any time soon.
The Latin American nation has been engulfed in protests, riots, looting and arson attacks for almost two weeks amid mounting anger over inequality and the cost of living. The police have lost control of parts of Santiago at times and the government was forced to temporarily call on the army for help.
President Sebastian Pinera had touted the Asia-Pacific Economic Cooperation forum and the United Nations climate change conference as evidence of Chile’s growing role on the global stage and as an opportunity to showcase South America’s wealthiest nation to the world. In the end, they have turned into a source of embarrassment, a symbol of his inability to control the streets of his own country. It is the first time a host nation has pulled the plug on the APEC meeting.
“This is going to damage the country’s image,” said Paulina Astroza, a political science professor at Universidad de Concepcion. “It is indicating that by the date of these conferences it won’t have things under control.”
At least 19 people have been killed in 13 days of unrest, more than 1,000 injured and over 380 supermarkets have been looted, a third of the total in the country. The metro system has run a partial service after more than 70 stations were damaged and security forces imposed a curfew for the first week.
Little Alternative
The government had insisted last week that it would push ahead with the conferences. That attitude seem to change after more than a million people marched through Santiago on Oct. 25 in the biggest demonstration in the country’s history, while violence flared up again on Monday.
Until the recent unrest, Chile was widely regarded as the most stable economy in Latin America, having enjoyed almost 40 years of rapid growth. Yet, Pinera may have been left with little alternative.
“The cancellation is a sign of how severe the crisis is turning out,” said Jennifer Pribble, professor of Political Science at the University of Richmond. “Hosting the summits would be seen as a distraction and an attitude of not taking the demands seriously.”
The peso fell 1.6% to 738.65 per dollar Wednesday, hitting a 16-year low, while the benchmark IPSA stock index dropped 3.1%. Chilean credit-default swaps rose 4 basis points to 42 bps.
‘Phase One’
The APEC forum would have thrown Chile into the global spotlight.
U.S. President Donald Trump had said he expected to sign a “phase one” trade deal with his Chinese counterpart, Xi Jinping, at the Nov. 16-17 event. They are now looking for somewhere else to ink the agreement.
The COP25 conference was an even bigger organizational event. The government was building a vast, temporary conference center in the south of Santiago at a cost of at least $62 million, including the purchase of electric buses to ferry delegates about.
A very preliminary calculation is that the protests so far could subtract about 1.5 percentage points from the country’s monthly economic activity indicator, according to Sebastian Diaz, an economist at Santiago-based Pacifico Research. The retail industry alone puts the cost at more than $1.4 billion, warning that sales will slump more than 10% in October.
Cold Water
Chile’s hotel managers association said that the cancellation of the event was a “bucket of cold water” and that it would damage the tourism industry as many had made investments to receive the thousands of delegates for the COP25 summit. Last year’s meeting in Poland received more than 30,000 delegates.
“This is going to have a short-term effect on investment expectations and increase uncertainty as it shows that the situation is worst than thought,” Martina Ogaz, an analyst at EuroAmerica in Santiago. “This could lead to a drop in foreign and local investments as well as lower job creation.”
The hospitality industry still has one thing to look forward to in Chile though. The country will go ahead with the final of soccer’s Libertadores Cup on Nov. 23, Sports Minister Cecilia Perez told journalists Wednesday.
“Regardless of what happened with APEC and COP25 -- these are different things,” Perez said.
--With assistance from Laura Millan Lombrana.
To contact the reporters on this story: Philip Sanders in Santiago at psanders@bloomberg.net;Eduardo Thomson in Santiago at ethomson1@bloomberg.net
To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, James Attwood
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