The last in our three-part series demonstrates the scale of corporate corruption that has driven public opposition to an economic model designed to benefit the country’s elite at everybody else’s expense.
Aside from the privatisation of public services during the dictatorship, Chileans have also had enough of being tricked by the country’s elite. There are myriad examples which go beyond the left/right political dichotomy.
All the cases below took place under governments which followed the end of the dictatorship in 1990 and entail tax avoidance, embezzlement, bribes, collusion and lobbying scandals. I will lay out the most relevant cases and include the amount avoided/stolen/bribed in chronological order; the full list is significantly longer than this. This information highlights how Chileans’ present discontent has been accumulating for decades.
Fraud against the State of Chile
|Year and type of fraud||Involved Parties||Amount (USD)|
|1994; Caso Dávila. Misappropriation of public funds from CODELCO (National Copper Corporation)||Juan Pablo Dávila (CODELCO Financial Trader)||$217 million|
|Discovered in 1996; embezzlement, agreement to get technological classrooms from Spain||Ministry of Education, Ricardo Lagos as Minister and Focoex (Spain)||$4 million Overpayment|
|2003; MOP Gate. Contract for non-executed or overpriced works. ||Carlos Cruz, Minister of Public Works (MOP)||$415,000|
|2014 Penta Gate; false invoices by Penta Bank to fund rightwing political campaigns.||Hugo Bravo (General Manager); Carlos Alberto Délano (Director); Carlos Eugenio Lavín (Director); Politicians who funnelled funds: Pablo Zalaquett (UDI, former Major of Santiago); Iván Moreira (UDI, Senator currently in post); Pablo Wagner (Mining sub secretary)||$3 million (estimate)|
|2015 SQM (Chilean chemical and mining company), related to Penta Gate. Diverting funds to bribe politicians through false invoices.||Julio Ponce (owner); Carlos Alberto Délano (owner); Carlos Eugenio Lavín (owner); Patricio Contesse (General Manager). Politicians involved, right wing: Jovino Novoa; Jaime Orpis; Pablo Wagner. Opposition (moderate left): Rodrigo Peñailillo (Minister of the Interior under Bachelet’s second term); Giorgio Martelli (Bachelet’s fundraiser); Carolina de la Cerda (Pablo Wagner’s sister-in-law)||$14 million, most of it for far-right Independent Democratic Union party (UDI)
|2015; Milico Gate; fraud, embezzlement by the Military.||Juan Miguel Fuente-Alba (Commander in Chief); Colonel Jorge Silva Hinojosa; Colonel Clovis Montero Barra; Corporal Juan Carlos Cruz||$200 million (estimate)
|2017; Paco Gate; fraud, embezzlement by the Police (Carabineros)||Flavio Echeverría (former Finance Director of the Police);|
Iván Whipple (ex-General). Full list of prosecuted parties here.
|2019; Piñera’s second home tax avoidance.||President Sebastián Piñera did not pay taxes for 30 years.||$26,000|
Total Fraud: US$477 million
It’s important to note that the punishment for these fraudulent practices is derisory. For example, both directors of Penta Bank, Carlos Alberto Délano and Carlos Eugenio Lavín, had to pay a fine, spend a few days in a special prison for economic crimes and attend mandatory ethics classes. This clearly angered many Chileans, who were given a stark example of how crime and punishment are highly dependent on one’s income status and/or place in Chilean society.
In the case of Milico Gate, high-ranking members of the Chilean military were spending obscene amounts of public funds on alcohol and gambling. One of the most appalling figures was the more than US$3 million spent at Monticello Casino between 2008 and 2014 by Corporal Juan Carlos Cruz.
Apart from these fraudulent acts against the Chilean State where both private citizens and public workers – including those in the armed forces – defrauded the population, there are even more problems when examining the illegal practices of private conglomerates. These crimes also go mostly unpunished: executives may be required to pay a fine but easily skip prison. Some of the most outrageous cases are outlined below:
Illegal practices of corporations
|Company involved||Fraud committed||Amount (USD)|
|Confort, Elite, Nova, Noble, Orquídea (CMPC conglomerate); Favorita, Magiklin (SCA conglomerate)|
Chilean toilet paper companies.
|Collusion: companies agreed on their market shares and the price of toilet paper between 2000 and 2011. ||Indeterminate amount taken from millions of customers. Each chain was fined with 18 million dollars each, but CMPC was exempt as the company offered compensation to customers.
|La Polar department store.||Increasing interest rates behind customers’ backs. Unilaterally renegotiated debt between 2006 and 2011.||Indeterminate amount.
Executives were fined. Most customers are from working class backgrounds.
|Farmacias Ahumada, Cruz Verde, Salco Brand|
Chilean pharmacy stores.
|Collusion: agreeing putting up the price of 222 medicines, some of them for chronic treatments between December 2007 and March 2008.||Indeterminate amount taken from millions of customers.
Voluntary compensation scheme not followed, still waiting for discount on medicines or by waiving costs.
|Cencosud, Walmart, SMU|
Supermarkets all over the country.
|Collusion: agreeing to fix the price of chicken. They agreed on price increases between 2008 and 2011.||Indeterminate amount taken from millions of customers. Each supermarket chain was fined $24 million.
|Johnson’s Department Store||Tax avoidance: not paying taxes and interests due. 2012.||$125 million
The fine was annulled by the Chilean Revenue System.
|Hites Department Store||Tax avoidance: not paying taxes and interests due. 2018.||$3.9 million|
These cases demonstrate the extent of tax avoidance among Chile’s economic elite and the light sanctions incurred, if at all. In all of these cases, the victims are mostly lower-income workers, as they are the principal market at the Johnson’s, Hites and La Polar department store chains. These fraud cases were not mistakes but a premeditated attempt to further squeeze the already-battered working class in Chile.
Broadly, the current unrest in Chile has deep roots in a) the legacy of Pinochet’s dictatorship and the privatisation of public services, b) unpunished fraud against the state and c) abuses by private companies which collude in order to make more profits from essential items such as toilet roll or medicines.
The price increase of 30 Chilean pesos in Santiago’s metro fare was the last straw. Following President Piñera’s decision to send the army onto the streets to repress protest, there has been an awakening in Chilean society, where the country’s widespread abuses and injustices have produced a mass movement to change not only several laws, but the whole economic model that rules people’s lives. The Chilean Spring will be remembered as the moment when the people finally woke up.