456 Politics of Latin America
Thus, Pinochet maintained order with iron-fisted rule and brooked no opposition to the economic policies of the Chicago Boys. After very difficult economic times from the end of 1973, the economy rebounded in 1979, and the private sector, which had always backed his labor-repressive policies, enthusiastically supported his economic policies. Pinochet, and his civilian supporters, however, also wanted to legitimate authoritarian rule. They accomplished this goal by writing a new constitution that was submitted to a plebiscite in 1980. The constitution was approved by a wide margin under very questionable electoral conditions. The constitution of 1980 was designed to guide Chile through a transition from military rule to a protected democracy. The new constitution awarded the military guardianship over the political system and safeguarded the privileges of property by making it virtually impossible to reform the free-market economic system. This constitution, with a few superficial amendments, still rules Chile today.
How did the constitution of 1980 accomplish these goals? The transition itself began in 1988 with a plebiscite to decide whether General Pinochet would continue as president or not. If the plebiscite ratified him for another eight-year period (to 1997), elections for Congress—the legislative branch of government—would be held in 1989. If the plebiscite rejected Pinochet, then open elections for the presidency and for Congress would, be held in 1989. Naturally, Pinochet and his supporters fully expected to win. Moreover, thinking beyond Pinochet's incumbency, once in the new political system, presidencies would be advised by a national security council in which the military had the dominant representation. The legislature and the electoral system were designed to strengthen Conservative interests, and extraordinary majorities were required to amend the constitution, making the document virtually unamendable, given the overrepresentation of Conservatives in the legislature.
From the vantage point of 1980, 1997 seemed a long time in the future. Repression, economic good times, the weight of official propaganda in the controlled press, and defeat in the 1980 plebiscite had left the banned political parties disheartened and in disarray. They resigned themselves to suffering Pinochet for another seventeen years, certain in the knowledge that they would not be able to mount effective opposition from the legislature after 1989. In the meantime, Pinochefs economists privatized the pension system, health care insurance, and the educational system. They also decentralized political administration by giving regions and municipalities more authority over local issues.
The economic crisis that beset Chile, and the rest of Latin America, in 1982-1983 changed the gloomy political prospects of the opposition. Chile's economy—like that of Argentina, Brazil, and Mexico—had boomed at the cost of a mountain of debt, much of it owed to foreign creditors. When international financial centers sharply raised interest rates to fight inflation and to shore up the flagging U.S. dollar, Chile's economy went into a tail-spin. Between 1982 and 1983 the GDP plunged by 15 percent. The financial system collapsed as firms and banks became insolvent and went bank-