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Who is profiting from rebuilding Chile?

Hint: Big businesses.

A Chilean soldier helps to build a shack at Dichato town, south of Santiago, April 12, 2010. (Jose Luis Saavedra/Reuters)

SANTIAGO, Chile — Only saints and the dead are free from conflicts of interest, Chilean President Sebastian Pinera told an Argentine paper. And if his first month in office is any indication, Pinera is nowhere close to sainthood.

Even before the earthquake struck, many had predicted the right-wing billionaire’s vast business interests would be a thorn in the side of his government. Then two weeks before Pinera took office, the 8.8-magnitude quake forced him to scrap his original plans for changing Chile.

Since then, Pinera has haphazardly tapped into the business world to fill in government positions, because, he says, that’s the only way to get people with expertise and experience. However, in doing so, he has disregarded the potential conflicts of interest his appointees are dragging in with them, especially those who will have a hand in the reconstruction effort.

To fill his cabinet, he chose largely conservative economists who had served as owners, managers or board members of major corporations. And in appointing regional authorities in the quake-stricken areas, he turned to owners and managers of construction firms with a potential financial stake in the rebuilding process.

The quake and tsunami severely damaged 260,000 homes and 4,000 schools. About 70 percent of hospitals in the quake-affected area were devastated, as well as roads, highways, churches, airports, stadiums, courthouses, electricity and telecommunications networks and military installations.

As of the first week of April, about 60 percent of public infrastructure damaged by the quake had been repaired, and 11,000 emergency housing units had been built, almost half by the Catholic NGO “A Roof for Chile.” The government has promised to set up 40,000 of these one-room wooden shacks by June 11 for the estimated 800,000 homeless.

The government assessed damages and losses at $30 billion, and taking insurance into account, estimates total public spending for reconstruction will come to $12 billion. The government has yet to announce how reconstruction will be financed, but has hinted at moderate tax increases, budget reallocations, the sale of non-vital assets, public and private debt and tapping into the state’s $12 billion rainy day fund invested abroad.

Over the past 30 years, privatizations and reduced public spending have shrunk the size and capabilities of the state. So the government has few alternatives than to turn to the private sector to carry out much of the reconstruction effort. Construction and engineering firms and producers of building materials are already delighting in the earnings expected for year’s end, and for several years to come.