Brazil-like scandal embroils entire Chilean political class

Bloomberg

Chile, widely viewed as a model of stability and democracy in a region plagued by impropriety and upheaval, is facing a campaign funding scandal that has cast a shadow over politicians of all major parties.
More than a year of revelations has helped drive to record lows the approval ratings of the government, President Michelle Bachelet, the Chamber of Deputies, the Senate and the opposition. With new allegations appearing almost weekly, the parties are struggling to find candidates with unblemished reputations for the 2017 election.
As in Brazil’s mounting scandal, one company sits at the center. In Brazil it is state-owned Petroleo Brasileiro SA funneling money to politicians; in Chile it is Soc. Quimica & Minera de Chile SA, or SQM, the fertilizer producer that supplies more than a fifth of the world’s lithium and is controlled by Julio Ponce, the former son-in-law of Augusto Pinochet, the country’s one-time dictator. And while the funds involved in Chile are a pittance compared with those in Brazil, the reach is helping to discredit the entire political class.
Those charged with accepting money illegally from SQM include fundraisers or assistants to Bachelet and a former president, Eduardo Frei, as well as Carlos Ominami, the adoptive father of a presidential candidate in the 2013 election. People linked to former President Sebastian Pinera and his Economy Minister Pablo Longueira are also under investigation by the tax authorities, though they have not been charged by the public prosecutor.
Through an external press relations office, SQM didn’t respond to an e-mail and phone calls seeking comment for this article. The company has said it is cooperating with the authorities.

Tarnished Model
No one has accused Bachelet herself of involvement but the scandal is so widespread that eight of Chile’s largest political parties have been linked to it. A comic recently suggested that all the country’s parties join together and form one party — called SQM.
“Chile has been considered a worldwide example in how to transition from dictatorship to democracy,” said Kenneth Bunker, a Chilean political researcher at the LSE and Universidad de Diego Portales. “For many, the recent scandals set democracy back 20 years, and can only be fixed with a constitutional reform.”
Chile has held six presidential elections since 1990, with little or no violence and the results uncontested. The country regularly ranks second in Latin America after Uruguay in Transparency International’s index of perceptions of corruption. Those perceptions are now changing. According to the tax authorities, SQM’s modus operandi was this: Politicians, their relatives or their assistants were urged to bill the company for work they never did. Since the first accusations appeared in January of last year, the public prosecutor has charged 21 people, with dozens more under investigation. Trials are expected within a year. Chileans remain skeptical.

Political Cost
“The widespread belief in Chile is that all politicians are involved in the irregular campaign financing scheme,” said Patricio Navia, a Chilean political scientist at New York University. In the 2017 election, he added, “people will have to decide between tarnished left-wing and tarnished right-wing candidates.”
The ruling coalition’s approval rating fell to 22 percent in February from 54 percent when it took office two years ago, according to surveys by GfK Adimark. The opposition is doing no better. Its approval rating is at 20 percent, while only 11 percent of people approve of the work of the Chamber of Deputies, down from 38 percent two years earlier. “Nobody comes out of this clean,” Navia said.
Ponce, who gained control of SQM during the dictatorship of his former father-in-law, has invited bids for his stake in one of the holding companies. SQM shares, down more than peers since the regulatory and legal strife began, have rallied in the past several months amid speculation Ponce will lose control of SQM.