A Visit with Andres Velasco, Economist and (now) Politician

It is a truism often alluded to that voters should be wary of politicians bearing big ideas.  When in 2006 Chile’s Andres Velasco left a professorship at Harvard’s Kennedy School to become Finance Minister in the administration of Michelle Bachelet he came with many ideas, principally that the cause of political instability in Latin America was due to poor administration of economic booms.

As Finance Minister, then, of a major copper-producing country during a boom in the price of that commodity, his first act was to institute a mechanism inspired by that observation.  A projected mean price was to be set, with excess revenues to be directed to a sovereign wealth fund.  In essence, he intentionally cooled the economy and became, in effect, the wet blanket at the party.

As a result, Chile became the first country to emerge from that world-wide recession, and Velasco, for his foresight, became in his country an enormously popular figure. 

I met Velasco in March not long after he announced his campaign for the presidency.  (Shortly our meeting, Michelle Bachelet stepped down from her position at the UN, returned to Santiago, announced her own candidacy.  She has since won the primary for leadership of the Concertacion Coalition and is contesting the presidency in the general election in the fall.)

But in the spring, when all seemed possible, Velasco kindly answered a few questions...


LINVILLE: How would you do things different? 

VELASCO: Chile is in the midst of a political legitimacy crisis.  Citizens do not trust congress, the judiciary, or the political parties. 

Much of this is related to the presence of a political class that has been in power for over a generation. People here often say: “For thirty years now I read the paper in the morning, I turn on the TV, it’s the same people, the same faces, on the right, on the left, and in the parties.”

One of the big issues that caused many citizens to be indignant is the allocation of government jobs to party friends. On a television programme last year I said that a very senior senator from the coalition I belonged to had pressured me to hire a dozen of his party associates and he had threatened to boycott our legislative agenda if I didn’t give in.  Well I didn’t give in. Dozens have since told me they had the same experience.

LINVILLE: Hugo Chavez died recently.  How will this change the political landscape of Latin America?

VELASCO: Over the last decade or so, two kinds of left governments, and left political parties, have coexisted in Latin America: first, modern, liberal, outward-orientated left-leaning governments, in countries like Chile and Brazil; and then populist governments with a tendency towards demagoguery in Venezuela and elsewhere. I would have hoped in recent years for a more energetic leadership on the part of the modernizers, particularly in Brazil.  Brazil missed an opportunity. At this moment the need is greater than ever to consolidate a modern kind of social democracy for those in Latin America who want their countries to be open, outward-orientated and to use economic development to improve the lot of the people in those nations.