Pinochet’s Buses: A Tale of Privatization and Subsequent Disaster

Santiago, 1980

Despite frequent attempts to refute the notion that there was ever a “Chilean miracle” brought about by free market reforms during the 70s-90s in Chile, many economists, and especially politicians/political speakers have continued to ramble about how every country in the world should embrace free markets based on it’s effects in Chile.

This is dangerous talk, though. Many doubts have been raised against the so-called Chilean “Miracle”, particularly because of it’s effects of the lives of ordinary Chileans and their society.

If we are to assume that there was a miracle, we can certainly conclude that the miracle didn’t apply to one place, at least; bus transit in Santiago. Almost half of Santiago’s population relies upon the buses for their daily commutes, but unfortunately privatization has been a massive detriment for busing in the region.

Pre-Pinochet Busing

The bus system before free market reforms was an industry coordinated and structured by both government and private owners and companies. With over 5,000 buses registered, Santiago’s busing was rather diverse and there were two main “classes” of bus owners. Small owners typically operated one old, degraded bus while the large operators had access to multiple buses and typically ran a sophisticated, efficient business which provided enough revenue to buy more and newer buses (Figueroa 2013, 88).

The Ministry of Transportation and Telecommunications had extensive power in establishing fares, giving licenses to bus operators, establishing routes, and other functions in city transit. Fares were heavily fixed and regulated by the Ministry. In addition, bus operators were expected to achieve a certain amount of service to fulfill quotas that would allow them to cross routes.

By the 50s, bus transit had become very aggregated and centralized, enabling for more effective regulation by the state and government monopoly on Santiago’s buses, Empresa de Transportes Colectivos.

However, many issues plagued this system. Most notably, there were shortages in buses. This led to issues such as longer waiting times (a higher demand for buses and a lack of enough buses causes this) and a severe underuse of available routes and roads. This traditional system of busing continued until 1977, where a series of reforms were made to make busing extremely deregulated, on the idea that there would be much more efficiency and bus usage. But did things really go this way?

Buses for All?

The “shock therapy” reforms implemented on Santiago’s busing had rapid effects on the bus supply. The total bus supply in Santiago increased by over 1300 buses between 1977 and 1981 (Figueroa 1990). This came as it became far more easy to obtain access to buses due to massive increases in profits and far less restrictions for licensing.

Fig 1. (Figueroa 1990, 26)

Many may take this as evidence of an improving transit system under a free market. However, such a conclusion could only come from an incredibly surface level analysis. The ramifications of an almost completely deregulated and private busing system began to manifest just as rapidly as the change in the bus supply.

The increasing bus supply signalled a start in a simultaneous decrease in occupants. Obviously, as the number of buses since increased, there were less occupants per bus. In addition, the loosening of regulation allowed bus owners to choose their own fares, and coupled with the profit-seeking motive of bus operators, led to increases in fares upwards to 147% (Fig. 2). As a result, many Chileans ended up walking, as this was simply a much more affordable alternative to taking a bus. Walking rates among residents of Santiago rose by 14% after free market reforms.

Fig 2. (N. Sapag & R. Sapag 1987)

Furthermore, the increase in fares could also be attributed to decrease in occupants. A sort-of cycle occurred where decreasing occupancy rates for buses led to higher costs, and thus higher fares. And as mentioned earlier, these higher fares would discourage potential occupants from riding buses, which led to even lower occupancy rates. Bus rides as a percent of total commutes had decreased since 1977 by over 10% (Fig 3.).

Fig 3. Mode of Transport in Santiago, 1997–1991 (Zegras 1997)

Measures by the Ministry of Transport show an even sharper drop in bus occupancy rates between 1977 and 1988. The drop can be seen in both regular buses and taxi buses (Fig. 4).

Fig 4. Number of Passangers on Vehicles in Santiago, Ministry of Transportation (Cited by Figueroa 1990, p. 29)

One more important point to make is about the unequal distribution of bus transportation, and therefore the unequal effects of efficiency. Many low income residents of Santiago, who typically lived further from the city limits, relied on buses far more than inner-city residents. Their far position from the city, coupled with an inability to afford fares, made work commutes far more difficult. And if they were paying for the bus, it became significantly more of a financial burden. In fact, by 1984 low-income residents spent around 20% of their income on bus travel, contrasted with just around 8% prior to the reforms (Collins & Lear 1995, p.235).

Unfortunately, this isn’t even the beginning of how bad bus transit had become under Pinochet and the Chicago Boys. As we will see, deregulation had serious consequences for the health of Santiago’s residents, both on a direct and indirect level.

“Choking on its Own Prosperity”

Santiago’s reputation as one of the most heavily polluted cities in the world is widely recognized, however what is not so recognized is some of the causes of this pollution.

Deregulation of the busing sector had led to massive increases in the amount of buses, as we have established earlier. However, deregulation also led to basically no environmental laws or policies that could limit pollution, as well as very little laws governing routes which led to just more buses driving around with very little care for the atmosphere. Although the Constitution of 1980 promised for “the right to live in an environment free from contamination”, this was hardly the case.

Buses emitted pollutants such as carbon monoxide (CO), nitrous oxide (NO2), and acetaldehyde to an astonishing degree. Hundreds upon hundreds of tons of pollutants, gases, and particulates were released upon Santiago every day, with NO2, sulfur dioxide, and particulate matter being mostly or entirely produced by buses (Osses & Fernandez 2005, 88).

Doctors and scientists in Chile have also complained about pollution’s relation with the ever-expanding desire to increase profit and economic growth. Professor Lionel Gil of the University of Chile stated in an interview that pollution was a “result of economic development without regard for the environment.”

The consequences of such levels of pollution have been immense. Hospitals in Santiago where regularly filled with toddlers, infants, and children who could hardly breathe because of the large amounts of smog. The harm children faced was even further exacerbated by a lack of adequate medicines and equipment to provide oxygen, a shortage which itself was a result of free-market policies in the healthcare sector.

Particulate matter-related deaths have increased massively since 2000, after a small decline starting in 1990, likely due to new environmental policy (TRANSRISK 2017, ). Since the 60s, deaths caused by respiratory tumors have increased dramatically as well (Smith 1989).

Pedestrians, Struck

As an oversupply of buses developed, traffic became a common sight in Santiago’s roads, with hundreds of buses waiting for the bus in front of them to move, which was a lengthy process.

One consequence of this was an increase in buses crashing into pedestrians or other vehicles. Half of all pedestrian deaths in Santiago were caused by vehicles (mostly buses), with an increasing rate of pedestrian fatalities since deregulation took place (Munger 2009). Some measurements found that the percent of fatalities caused by buses increased by over 50% after deregulation.

Another factor that played a role in the uptick of these deaths was pure greed. Bus drivers, desperate to find a potential passenger, often made extremely dangerous lane switches and turns or sped up without warning and ended up flattening pedestrians who were unfortunate enough to be crossing the road at that time. Competition had gotten to the point where operators were willing to cause death if it meant greater profits could be achieved.

Conclusion

Although Pinochet’s free market dictatorship created countless problems, the bus sector was by far one of the worst failures. Without regulations, bus operators were left to the rules of competition. This led to complete and utter chaos. Practically nothing remotely good came out of privatization of buses, other than, perhaps, the ideological satisfaction of the Chicago Boys.

Things have gotten better with the social democratic regime that took power after Pinochet lost the Chilean election of 1990. However, as shown by the protests sparked by increasing fares that occurred in 2019, many changes will have to be made to create more efficient, equitable bus service for all Chileans.

One thing will remain clear, nonetheless; it should never be assumed that privatization will serve the needs of all people.

Sources

Figueroa, Oscar. Four Decades of Changing Transport Policy in Santiago, Chile. Research in Transportation Economics, vol. 40, no. 1, 2013, pp. 87–95. Crossref, doi:10.1016/j.retrec.2012.06.031.

Figueroa, Oscar. La desregulación del transporte colectivo en Santiago: balance de diez años. Revista EURE, vol.16, no. 49, pp. 23–32.(1990).

N. Sapag and R. Sapag. Algunas consideraciones en torno al IPC y la locomoción colectiva, (1987).

Zegras, Christopher, and Todd Litman. An analysis of the full costs and impacts of transportation in Santiago de Chile. Washington: International Institute for Energy Conservation, (1997).

Figueroa, Oscar. La desregulación del transporte colectivo en Santiago: balance de diez años. Revista EURE, vol.16, no. 49, pp. 23–32.(1990).

Collins, Joseph, et al. Chile’s Free Market Miracle: A Second Look. Institutue for Food & Development Policy, 1995.

Osses, Mauricio, and Rodrigo Fernández. Transport and air quality in Santiago, Chile. Advances in city transport: Case studies. (2006): 79–105.

Cerdas, Rodrigo, and Luis Gonzales. Socioeconomic Impacts of Air Pollution in the Chilean Metropolitan Area. Science Policy Research Unit. (2017)

Smith, James. Chileans Face Downside of Economic Growth — Staggering Air Pollution. Los Angeles Times, 11 Mar. 2019, www.latimes.com/archives/la-xpm-1989-07-22-mn-3351-story.html.

Munger, Michael. Planning Order, Causing Chaos: Transantiago. (2009).

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