Chile's new leftist president gets reality check as support wanes

By Alexander Villegas

SANTIAGO, June 29 (Reuters) - The optimism engulfing Chile's leftist President Gabriel Boric as he took power in March has dimmed as inflation, social unrest and political missteps dent his popularity and fuel doubts about a push to steer the economy away from market-friendly policies.

The former student protest leader handily won a presidential election in December, rattling business, particularly the mining sector, with his proposals to change tax laws to fund social spending and toughen environmental regulation. Chile is the world's top producer of copper and No. 2 producer of lithium.

An opinion poll on Monday showed Boric's support plunging to 34%, the lowest level of his presidency, closely mirroring waning backing for the country's planned new constitution.

"It's been three months of a lot of intensity, big lessons, self-criticism and learning to work as a team," Camila Vallejo, a communist in Boric's Cabinet who serves as the official spokesperson for his administration, told Reuters.

"The first difficult moment we had was our first week," she added, mentioning how the interior minister's visit to the restive Araucania region had been interrupted by gunfire.

How Boric fares is key for Chile and a barometer for leftist governments in the region and their ability to win over voters angry with high gas and food prices, cooling economic growth and the residual impact of the coronavirus pandemic.

Inflation in Chile is currently running at an 11.5% annual rate, far above the central bank's target range of 2% to 4%. Monthly inflation rose to almost a 30-year high in March.

Boric marks a break from the Andean country's traditionally strait-laced leaders and remains a beacon for those citizens fed up with inequality in one of the region's wealthiest nations after violent protests in 2019.

He pledged during the 2021 election campaign to "bury" the country's market-led economic model, though tempered his aims when he installed a market-friendly finance minister.

DEEP CHANGES

But while Boric's environmental agenda and focus on inclusivity - women make up a majority of his Cabinet - have earned him plaudits, analysts said most voters were more focused on everyday matters.

"People want to make it to the end of the month, be able to buy a car, be certain their kids will prosper," said Cristobal Bellolio, a political analyst and professor at the University of Adolfo Ibanez in Santiago, the country's capital.

Unrest between indigenous groups and authorities in southern Chile, where trucks have been burned and a train derailed, has also tested Boric. And in late March, about two weeks after the new president was sworn in, thousands of students demonstrated in Santiago to demand higher food stipends. One student was shot during the protest.

"Once you're in power, you realize that the carrot isn't enough," added Bellolio. "Once the party was over and things went back to normal, it was logical that the themes of public safety were going to be a headache for the government."

Giorgio Jackson, a minister and Boric confidant, told Reuters earlier in June that raising the minimum wage had been one of the government's biggest victories so far, and the next big push was tax reform, including for the mining sector.

Chile also faces a key referendum in September on a new constitution to replace the existing market-centric one that dates back decades to the neo-liberal economic policies under military dictator Augusto Pinochet.

While that process predates Boric, it underpins many of the ideas he is trying to push on social rights and the environment.

Vallejo said the government was focused on holding a fair and transparent plebiscite and would push its agenda regardless of the outcome, though she added that the current constitution limits the administration's proposed reforms.

"We'll push with the same conviction we had when we took power," Vallejo said. "Chile worked hard on this and we'd like to help show the world we can make deep changes." (Reporting by Alexander Villegas; Additional reporting by Natalia Ramos; Editing by Paul Simao)