Very interesting interview, giving a perspective on Chile and South
America that some have already suggested on Futurework.
Barry
https://www.mckinseyquarterly.com/Public_Sector/Management/Managing_crises_and_shaping_the_future_of_Chile_An_interview_with_Sebastian_Pinera_2841
Managing crises and shaping the future of Chile: An interview
with Sebastián Piñera
Chile’s president has taken a businesslike approach to recovering from
an earthquake, rescuing miners, and rejuvenating his country’s economy.
JULY 2011 • Dominic Barton and Alejandro Krell
Minutes before the inauguration of Sebastián Piñera as president of
Chile, on March 11, 2010, an earthquake hit his country. While small
relative to the magnitude-8.8 quake that had rocked Chile 12 days
before, it still underscored a key theme of the president’s first year
in office: crisis management, in response both to the earlier, massive
earthquake and to the accident, later in 2010, that trapped 33 miners
some 2,300 feet underground for 69 days. In an interview with
McKinsey’s global managing director, Dominic Barton, and Alejandro
Krell, a principal in the firm’s Santiago office, President Piñera
described what he learned from those experiences, how his background
as a business leader influences his governing approach, and some of
his dreams for Chile and Latin America.
Editor’s note: this interview was conducted prior to the March 2011
earthquake and tsunami in Japan.
The Quarterly: What did you learn about crisis management from your
experiences with the earthquake and the mining accident?
President Piñera: One thing I saw is that you cannot lose a second.
Very often, especially in political settings, the first hours or days
or even weeks are spent placing blame and dealing with internal
conflicts. With the oil spill1 in the US, they lost two weeks arguing
who was to blame. Also, in the Katrina2 case, they lost time arguing
what to do.
Both in the earthquake and with the miners, we acted immediately,
within the first few hours. The earthquake happened a few days before
we took office, but when we did we had already designed a plan, which
we of course enhanced later, since it was based mainly on an “outside-
in” diagnostic, with incomplete information. In the case of the
miners, we made a decision the very night of the accident: we were
going to take full responsibility for the search-and-rescue effort for
every single person. The private company that owned the mine was not
able to do it. Therefore it was either us or nobody.
A second important factor for us was concentrating our efforts with
the help of a clear, quick diagnostic and then assigning specific
responsibilities for addressing different needs simultaneously, even
though their urgency may have been different. In the case of the
earthquake, one team dealt with the most urgent challenges; another
team focused on providing, before the onset of winter, shelter for
displaced people. A third team began designing reconstruction plans
that required more time—for instance, changing the design of the
regulation plans for cities. All these teams started working right
away. In the case of the miners, we had several rescue plans working
simultaneously, and well before finding them we had a team thinking
about how to address their immediate needs if we did.
A third important factor was acknowledging our limitations and the
complexity of the situation—and requesting external help when it might
be useful and relevant. That was of utter importance in the rescuing
of the miners. Contrast that with the case of the Russian submarine,
the Kursk,3 where the Russian government didn’t ask for help until it
was too late. The British and the Americans had the technology to
rescue them alive, but the Russians didn’t ask for it.
The Quarterly: Could you speak a little about your career and how you
wound up in this office?
President Piñera: In my life, I have had three vocations. My first was
academic. I went to Harvard, got a PhD in economics, and was a
professor in universities in Chile and abroad for many years.
One day in the late 1970s, I remember saying, “Enough is enough,” and
decided to become an entrepreneur. I created a number of companies,
including one that introduced credit cards to Chile. That was
extremely successful and it gave me the resources to invest in other
businesses—in construction, in airlines, in TV, for example.
Finally, in the late 1980s, as we recovered our democratic system, I
decided to enter public service. I ran as an independent and was
elected to be the senator representing Santiago. After eight years, I
didn’t want to run again. For a time, I focused on some foundations—
one that helps educate young women with low incomes, one oriented
toward the environment, one seeking to promote Chile’s embrace of
freedom and democracy—that I had created along the way. It wasn’t
until 2005 that I got back into politics, first losing a very close
race for president to Michelle Bachelet4 and then winning four years
later.
The Quarterly: Did that background influence the way you shaped your
team as you started governing?
President Piñera: We brought in a lot of people from the private
sector and from universities. To some extent, that was because our
party5 had been in opposition for 20 years, so our most experienced
people were already in Congress, and we don’t have a parliamentary
system, where members of the House or Senate can easily become
ministers. In any event, just about all our cabinet members have PhDs
from very well-known universities or were extremely successful in the
private sector. Most didn’t have much experience in the public sector,
so they had to learn rapidly.
Our foreign-affairs minister, Alfredo Moreno, is an interesting case
in point; basically, he was an entrepreneur with strong interests in
international relations. He’s learning rapidly, and he’s reforming our
Ministry of Foreign Affairs, which was a very traditional one. He’s
asking tough questions about the role of his office in advancing
Chile’s interests and suggesting that “old diplomacy” doesn’t work
now. One example would be saying, “Our exports have been stagnant for
the last two or three years. We want our exports to grow by 10 or 15
percent this year. How do we support the process of looking for new
markets?”
The Quarterly: Describe your broader economic goals for Chile.
President Piñera: Chile had 12 magnificent years from 1986 until 1997.
Fat cows. GDP was growing more than 7 percent per year. We were
opening up the country to the rest of the world, creating jobs, and
strengthening our macroeconomic balances.
But something happened in 1998 with the Asian financial crisis, and
starting then we lived through 12 years of lean cows. The growth rate
and the rate of employment growth both went down by half. We went from
the Chilean miracle to the Chilean nap.
Now we are trying to revive the Chilean miracle by striving to become,
by the end of this decade, the first Latin American country able to
overcome underdevelopment and defeat poverty. And this is feasible.
Chile is a country with a $14,000 per capita income. If we can grow at
6 percent per year for the next eight years, we will achieve $24,000
by 2018. That’s basically the threshold between the underdeveloped and
the developed world; today, the average per capita income of the OECD6
is $26,000. We want to become at least an average member7 of the OECD
and, hopefully, to go beyond that.
To defeat poverty, we must attack its real causes. There are many, but
the most important ones in Chile, according to our diagnosis, are the
lack of equality in education, our weakness in creating good jobs, and
weaknesses in the family.
We are working on those three areas, but that will take time. So we’ve
also created what we call the ethical family income, which is
something similar to what has been known as a negative income tax.
Basically, we will transfer enough income to families to bring them up
to the extreme poverty line. In order to not create perverse
incentives, we will ask something from those families: their kids have
to go to school; if they are working age, they have to be working or
training—things like that, to help our people to help themselves.
The Quarterly: You’ve also set aggressive goals for creating jobs.
President Piñera: Yes. We need those jobs—because they will help us
defeat poverty, because we have a very high unemployment rate, and
because we are expecting a huge influx of women into the labor force.
Labor force participation by women is currently very low, and it’s
growing rapidly. So we have to create jobs for them—as many as one
million over the next four years, to help us equal the level of female
labor force participation in other OECD countries.
The Quarterly: How are you going to do that?
President Piñera: To answer that, I need to say a little more about my
view of the role of government. For a long time, I thought there were
three basic pillars for the government: to have a stable, legitimate,
democratic system; to have a free, open market economy, unencumbered
by fiscal imbalances; and to have a state that works. Those pillars
were very scarce during the 20th century in Latin America. Chile was
among the first to achieve them, which helped us outperform some of
our neighbors.
But I don’t think that’s enough for what’s coming now. In the society
of knowledge and information, we need at least four new pillars: to
give a quality education to everyone, to invest in technology, to
promote innovation and entrepreneurship, and to have a very flexible
society and economy. This last one is important because the only
constant, these days, is that the world is changing, and we have to be
ready to adapt ourselves—to take advantage of the opportunities and to
adjust to the changes that come from abroad.
Basically, our government’s program is designed to strengthen the
three traditional pillars while creating these four new pillars. So we
are undertaking a huge educational reform—trying to fix a system that
hasn’t worked because it was caught up by all kinds of interest
groups. We have a plan to triple our investment in technology as a
percentage of GDP. We are promoting innovation and entrepreneurship
everywhere, including within the public sector. And of course we are
trying to have a more flexible and adaptive economy and society. All
of these things should help with job creation over time. In the
shorter term, boosting exports also will be a critical factor.
It’s challenging because we are doing all this while facing the huge
costs of rebuilding what was destroyed by the February 2010 earthquake
and the tsunami that came after. The earthquake devastated us. We lost
more than 500 lives. We also lost one-third of our schools and
hospitals and suffered enormous damage to bridges, airports, and ports—
all adding up to $30 billion in losses, which is roughly 18 percent of
our GDP. Just to give you a comparison, the total cost of Hurricane
Katrina was less than one-tenth of 1 percent of the US GDP.
The Quarterly: Looking beyond Chile, to your region as a whole, could
you share any thoughts about Latin America’s prospects?
President Piñera: Latin America is incredible; it has everything: huge
natural resources, vast territory, a common culture and language. We
haven’t had religious conflict or the kind of internal wars that the
Europeans had into the 20th century. So everything was here for us to
become a developed continent. This didn’t happen—but I think that now
we are waking up and that this will be a century when many countries
go in the right direction.
Mexico, Brazil, Colombia, Peru, Chile—we all have reached a strong
consensus behind a real democracy with the rule of law, separation of
powers, and freedom of the press. We all are creating open, free,
competitive market economies. And we all are trying to achieve more
equality of opportunity.
There’s nothing limiting us. Not only did the Iron Curtain and Berlin
Wall fall but another wall that separated the developed countries in
the Northern Hemisphere from the underdeveloped ones in the Southern
Hemisphere has fallen away with globalization, the Internet, and more
freely flowing knowledge. We have access to the same opportunities as
any other person in any other part of the world. Now it’s up to us to
work harder, be more innovative, invest more in technology, and reform
our educational system. It’s our time. And it’s our responsibility—to
history and to the future—to do what our parents and grandparents
always wanted to do but never achieved.
About the Authors
Dominic Barton is McKinsey’s global managing director and is based in
the London office; Alejandro Krell is a principal in the Santiago
office._______________________________________________
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