By Juan Forero
Washington Post Foreign Service
Friday, March 12, 2010; A09
SANTIAGO, CHILE -- Sebastián Piñera pledged during his presidential campaign to bring fiscal prudence to Chile, but moments before his inauguration Thursday, he received a jolting reminder of how last month's 8.8-magnitude earthquake has shredded that promise.
A quick succession of aftershocks left dignitaries, including several Latin American presidents, smiling nervously and eyeing the ceiling at a ceremony in the congressional building in coastal Valparaiso. Piñera later toured the area that had been rattled by the tremors, one of them a 6.9-magnitude quake nearly as powerful as the one that hit Haiti in January.
The aftershocks did not cause fatalities or crippling damage. But the image of a new president and his aides rushing to a disaster zone underscored the impact of the Feb. 27 quake and tsunami on Piñera's plans for the next four years. The billionaire businessman had vowed to generate 6 percent economic growth a year and hundreds of thousands of jobs. Instead, he will be forced to spend billions to revive a region of ruined hamlets, collapsed bridges and shuttered industries.
"Man plans, God laughs -- it's one of those situations," said Cynthia Arnson, director of the Latin American program at the Woodrow Wilson International Center for Scholars in Washington. "Whatever planning for the transition had been underway was certainly taken off the table when the earthquake hit."
In his first stop Thursday, in the city of Rancagua, 70 miles west of the epicenter of the biggest aftershock, the new president tried to convey an image of composure and competence. He urged calm while promising speedy delivery of assistance.
"You should know that there is a government that is acting as fast as possible," Piñera, 60, told residents.
Officials have estimated that last month's quake, among the largest on record, may have caused more than $15 billion in damage. Roads, ports and hospitals collapsed, and hundreds of thousands of homes were destroyed or seriously damaged.
"We lost everything, everything," Maria Teresa Mios, a schoolteacher, said recently as she searched for belongings in the remains of her home. "We lost what we had worked all our lives to have."
Andrés Bianchi, a former Central Bank president, described the quake as a blow to a prosperous region that churns out a variety of export products. The timber industry has been hobbled by the loss of ports and factories, he said. Fishing fleets were wiped out, and one of Chile's signature export industries, wine, is facing tens of millions of dollars in losses after irrigation systems buckled and huge holding vats toppled.
Bianchi said that although Piñera's vision of 6 percent growth might have been overly optimistic, the economy under his predecessor, Michelle Bachelet, had been humming. Inflation was low, the price of Chile's most vital export, copper, was high, and forecasters predicted that economic growth would top 5 percent this year.
Still, Bianchi and other economists say Chile is perhaps the best-prepared country in Latin America to handle a major disaster.
It has $11.3 billion in savings from this past decade's commodities boom, according to the latest government statistics. And Standard & Poor's has rated the country A+, the region's highest rating, which means it has access to financing from abroad at low interest rates.
"It's a high-capacity country with a quite efficient public sector, and a country enjoying the luxury of a sizable war chest of savings," said Carlos Felipe Jaramillo, a World Bank economist and director for Andean countries who arrived here Thursday to meet with financial officials. "They have all the options that are open to a solid country with a good record."
Chile will probably issue bonds to help pay for rebuilding, said Patricio Navia, who teaches Latin American politics at New York University. He also said that insurance would cover damage for many companies.
Some economists said they expect Piñera to also increase deficit spending, once Congress relaxes fiscal rules designed to keep the government from spending above its means.
The challenge for Piñera, Navia said, is to deliver results for the working class in the earthquake zone, adding that his political honeymoon may be short among those who lost their homes.
"The difficult part is for Piñera to show he is more concerned with the people who live in those homes than the companies who build them," he said. "He's historically been closer to the business interests."
Piñera, an entrepreneur who introduced credit cards to Chile and owns a stake in the country's signature airline, worked hard as a candidate to overcome the perception that his affluence and ties to the right would prevent him from connecting with ordinary people. Casting himself as an able steward who would improve Chile's economy, he won a January runoff against the candidate of the left-of-center coalition that had ruled for 20 years.
After his inauguration, Piñera told reporters that the challenge ahead is to "reconstruct our country to be better than the one we had before" and to "create a country without poverty, create a developed country."
Among the emergency measures his government plans to propose is a special fund that would provide cash payments to 4 million of Chile's poorest people.
"I am sure, as we've done it so many times before, that the Chilean people will be up to the role of this challenge," Piñera said.