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Long and narrow, Chile clings to the western edge of South America's South­ern Cone. Hugging - page 32 / 46





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468                           Politics of Latin America

employment), increases in minimum wages, and job training programs. Other measures included channeling resources to a social investment fund (Fondo de Solidaridad e Inversion Social, FOSIS). FOSIS provided funds for commu­nity projects in small business start-ups, neighborhood improvement, and small-scale rural projects. The Aylwin and Frei administrations have also in­creased public spending on health care and education. For example, during Aylwin's government expenditures on public health rose by 70 percent com­pared to the military dictatorship. These were mainly channeled into the pub­lic health system, on which 75 percent of Chileans rely. Still, public hospitals had deteriorated so much during the military government that actual service increased only moderately. The private health insurance system, which only about 25 percent of Chileans can afford, remained unaffected by the change. It was one of the "social modernizations" of the Pinochet era.

Tax hikes financed increased social spending. The Aylwin. administration negotiated tax increases with the center-Right, which used its majority in the Senate to set new rates at levels that were comfortable for business. Although the manufacturer's association (Sociedad de Fomento Fabril) opposed any new taxes, most business groups and National Renovation were more pragmatic. In fact, they insisted that the corporate tax portion of those increases be ear­marked for social expenditures. Progressive tax reform raised overall gov­ernment expenditures for social purposes from 9.9 percent of the GDP under Pinochet to 11.7 percent under Aylwin. Congress renewed the tax reform law, which had a short sunset clause, toward the end of the Aylwin administra­tion. Although the rates were now lower than in the early 1990s, they remained higher than under the military government. It is worth noting that services to lower income sectors did not necessarily increase by much. Much of the spend­ing went to improve deteriorated infrastructure rather than direct service. Moreover, many of the high-cost items in the social service category did not involve direct assistance to lower income groups. These included payments to an expanded battery of consultants and rebuilding the institutional capac­ity of government agencies that provide the services, such as hiring more per­sonnel, providing more office equipment, and facilitating transportation.

Severe repression of workers and their organizations during the military government placed labor relations high on the Concertacion's policy agenda. Reform of the military government's labor code, however, suffered a worse fate than the fight against poverty. In a united front, business organizations and right wing political parties used the institutions of Chile's protected democracy to reject the central propositions of the government and labor movement through two Concertacion administrations, and the battle lines have been drawn again in their third administration under Ricardo Lagos. The key issues were the strengthening of union organization, finances, mem­bership, and expanding the right to strike.

In the wake of the military dictatorship, the labor movement, a major con­stituency of the Concertacion, had one fundamental demand: to strengthen job security and collective negotiation. To address these issues, the Aylwin ad­ministration proposed a bill to reform three key aspects of the military gov­ernment's labor code. First, the Aylwin bill sought to make it more difficult and

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