The English news media so far is doing a terrible job contextualizing the protests that have shut down Santiago, the capital of Chile, as well as other parts of the country. Whether this is due to mere ignorance or something more sinister, the focus on transit fares, looting, “chaos,” and the bizarre obsession with supermarkets fails to grasp the reasons that Chileans have taken to the streets in unprecedented numbers. Even the slightly more thoughtful thread of income inequality fails to adequately describe the depth of helplessness the average person has with regard to their economic fate. This sense of injustice—and the source of this sentiment—is necessary to really understand why Chile’s own citizens are bringing the country to its knees.
As I began to write this I realized that to do any kind of justice to the breadth of discontent here this would have to be a multipart effort. Here I will summarize, in English, noteworthy cases of corruption and collusion that help to comprehend why a bunch of students jumping turnstiles turned into a massive mobilization.
Part 1: Corruption
This is a primer to a series of notable corruption cases that have come to light over the past five years, involving both businesses and public institutions (and sometimes both). While some of the acts stretch back to nearly 2000, in these cases only now are the sentences being handed down.
Pacogate (“Cop-gate”) - 130 members of the Carabineros (national police) charged for fraud and money laundering, in which almost 40 million USD were siphoned off the pension fund of the same organization.
Result: Five received sentences of about five years in prison. Six implicated received suspended sentences to be served in freedom.
Milicogate (“Soldier-gate”) - Officials of the Army stole up to 200 million USD from the Reserved Fund of Copper (a pool of money taken from Chile’s nationalized copper mining company that is allocated to the defense budget) using duplicated invoices.
Result: Two convicted in the scandal received prison sentences of 10 and 12 years.
Caso Penta - Grupo Penta, a Chilean investment fund, colluded with tax officials to issue invoices for services not rendered. The income from this fraud was channeled to campaigns for candidates of the right-wing Independent Democratic Union (UDI).
Result: Most of the implicated received suspended sentences or house arrest; none saw the inside of prison.
Caso SQM - Post-Penta, further investigations revealed a series of false invoices issued by the Sociedad Química y Minera, the world’s largest supplier of lithium, to over 170 individuals, over 80 of whom were linked to political parties. Many were from the UDI, but the implicated crossed the entire political spectrum.
Result: Various politicians implicated in the scandal were forced to resign. Of the hundreds implicated, the case closed in January with only 8 sentenced to suspended prison sentences; one is now regional president of the National Renovation party in the Bio Bio region.
Caso Caval - A case of “influence trafficking” in which a parcel of land was purchased by a company co-owned by Sebastian Dávalos, the son of then-President Michele Bachelet (Socialist Party; PS) immediately following her election. The parcel was re-zoned several months later and sold for a profit, suggesting insider knowledge of the re-zoning. The case is notable for involving a number of of Chile’s elite. Apart from Dávalos, the person who presumably approved the transfer of money to purchase the parcel was Andrónico Luksic Craig, one of Chile’s richest men. The parcel itself was administered by Herman Chadwick, the cousin of current President Sebastián Piñera and the brother of current Minister of the Interior and Public Security, Andrés Chadwick.
Result: The involvement of Bachelet’s son greatly contributed to the downfall of the left-wing Nueva Mayoria coalition in the 2018 elections, which ushered Sebastian Piñera back to power. All of the sentenced received suspended or commuted sentences; none saw the inside of a prison.
Price fixing, chicken, part 1 - In 2015, three chicken producers—Agrosuper, Ariztia, and Don Pollo—were convicted of fixing the price of chicken for essentially the entire aughts.
Result: fines of up to 23 million USD for each company. No individuals sentenced.
Price fixing, chicken, part 2 - More recently a trio of supermarket groups—Cencosud, Walmart (yes, that Walmart), and SMU—were convicted of fixing the price of chicken again between 2008 and 2011.
Result: fines of up to about 5 million USD for each company. No individuals sentenced.
Price fixing, toilet paper - Two companies, CMPC and Pisa, colluded to fix the price of toilet paper over the aughts.
Result: The two companies were fined a total of about 180 million USD, much of which was returned to Chileans based on an arcane estimation of toilet paper usage from 2000-2011. No arrests.
Price-fixing, diapers - CMPC—of the toilet paper fixing—and Kimberly-Clark fixed the price of infant diapers from 2002 to 2009.
Result: Businesses involved will donate 170,000 packs of diapers to the public healthcare system. No arrests.
Price-fixing, other - Prior to the resolution of the above price fixing scandals, Chile had previously suffered price fixing of medicine (2012), refrigerator compressors (2012), and shipping (2015).
Result: For medicine, three pharmacies were fined between 20 million USD and 1 million USD. For compressors, the initial fine of 15 million USD was ultimately reduced to 5 million USD. For shipping companies, the original fine of 75 million USD was ultimately reduced ot 9 million USD, partitioned between two companies.
The Varsity Blues admissions scandal - Yes, that scandal—a man named Agustín F. Huneeus was charged with giving bribes to a) change his daughters’ SAT scores, and b) giving his non-water-polo-playing daughter a spot on USC’s water polo team. A. F. Huneeus is the son of Agustín C. Huneeus, who developed the Concha y Toro winery into one of Chile’s biggest.
Result: Five months in prison, a fine of 100,000 USD and 500 hours of community service. (The sentence was handed down by a court in the United States)
Alcoholic soccer stars - OK, literally nobody is out on the streets for this reason, but these two popular cases illustrate the schizophrenic nature of Chilean justice. In 2015, in the middle of Chile’s first successful Copa América campaign, central midfielder Arturo Vidal wrecked his Ferrari drunk driving on the way back from a casino. Even earlier, in 2009, goalkeeper Johnny Herrera killed a girl drunk driving.
Result: “King” Arturo continued playing in the Copa América, the only punishment being a 2-year suspension of his license and community service. Johnny was ordered to pay about 65,000 USD to the parents of the victim. It should go without saying these are not normal punishments in Chile for drunk driving and manslaughter.
Tax evasion and avoidance - The current president, Sebastián Piñera, maintains shell companies in the British Virgin Islands. Earlier in the year, it was discovered that he failed to pay 30 years worth of taxes on his summer home in the south of Chile. It goes without saying he is also very rich, with a net worth of about 2.8 billion USD making him one of the richest men in the country.
Result: The possession of offshore bank accounts is not prohibited by law in Chile. As a statute of limitations had expired, Piñera was obliged to pay only 3 of the 30 years worth of back taxes on the summer home.
Summary
The punishments given in each case are widely considered to be “light” with respect to the magnitude of the crimes committed. Corruption directly affected internal politics in the Penta/SQM/Caval cases, yet in those instances no prison sentences were handed out. Several cases involved the misappropriation of public funds, and in the numerous price-fixing scandals, directly affected Chilean consumers.
Why is this important to consider when viewing the events in Chile from afar?
First, these events demonstrated the existence of corruption at all levels of government and across party lines. Pacogate and Milicogate added to the widespread distrust of the police and the armed forces, respectively. The Penta/SQM/Caval cases implicated the entire political class. “Normal” means of resolving corruption and collusion, through political and civil channels, are perceived as being increasingly unlikely to result in significant changes to a culture of corruption within civic entities. In this light, the scale of the protests seen reflect a truly profound dissatisfaction with the political status quo, and disbelief in the ability or willingness of the current government to enact change on its own behalf.
Second, the heavy-handed response to last week’s student-led turnstile jumping protests began was viewed in light of the exceedingly light sentences handed down to people who stole millions upon millions of pesos from the state, who in many cases were never detained nor saw jail time. The contrast in the treatment of people who steal 230 pesos versus those who steal 23,000,000 was not unnoticed, especially when the police began shooting (WARNING: gunshots, blood).
Third, looting is a grave criminal problem at the moment, with residents in some neighborhoods forming vigilante groups due to the absence of law enforcement. However, the widespread looting occurring in supermarkets (1, 2) across the country can’t be fully understood, sadly, without the context of decades of price-fixing of necessary goods, occasionally by the same supermarkets which are being looted. For some people, it’s easy to establish a moral equivalence between a cartel cheating one out of their money and subsequently stealing from that same cartel—I feel like I just saw a movie about that. Supermarkets are obvious targets, and the looting is obviously not restricted to supermarkets alone, but my read is that the perceived corruption of the large supermarket chains is a significant precipitating factor in the ongoing looting.
Fourth, the concept of “evasion” is one of two defining concepts for the protests (the other being violence, for a later post). Turnstile-jumping here is referred to as “evasión,” which also is used in the context of tax evasion and avoidance. A certain irony is therefore seen when Piñera, who openly admits to incorporating shell companies in tax shelters and committed 30 years of tax fraud on a vacation home, denounces “evasión” on the part of high school and university students. In that context, as well as the context of past price-fixing, evasion of metro fares seemed not such a terrible crime that it warranted the present response of the government.
That the military was deployed for the first time since the return to democracy in response to what is viewed as essentially an episode of mass fare dodging only reinforces the popular idea that two levels of justice exist in Chile: a privileged system of corruption and collusion benefitting businesses and the ultrarich, and the “mano dura” for the less well-heeled. The domination of the political landscape by moneyed elites, as well as repeated corruption scandals within, have led to astonishingly low levels of public confidence in the government and judicial system (PDF). Finally, lack of transparency about pricing and past price-fixing scandals led to general antipathy towards the metro fare hike and sympathy for student fare dodging; this led to increasing pushback as the government upped the ante by deploying the military.
I live in a well-off comuna that voted for Piñera in 2018, and that was today the gathering place for several thousands who defied the military curfew. Economic inequality undoubtedly forms a large part of the pool of discontent feeding the protests, but fails to adequately explain the cross-party, class-inclusive nature of those in the streets. Rather, corruption and collusion—and the lack of consequences for either—engendered a widespread sentiment of economic injustice, which forms one of the underlying pillars of the protests now in motion.