Bachelet moves to the centre with big cabinet changes in Chile

President Michelle Bachelet has announced Chile's most profound cabinet reshuffle since the return of democracy 25 years ago after demanding the resignation of every minister.

Shifting the balance of power in her centre-left coalition towards the centre, Ms Bachelet replaced key ministers in a bid to counter an all-time low in her popularity ratings, which have been hit by a sluggish economy and corruption scandals that have stalled her ambitious reform agenda.

The appointment as finance minister of Rodrigo Valdes, a respected Massachusetts Institute of Technology-educated economist who has worked at the International Monetary Fund, is aimed at restoring confidence in the economy of the world's top copper producer, which is struggling with falling commodity prices and poorly timed tax changes.

Jorge Burgos, formerly the defence minister, replaces interior minister Rodrigo Penailillo, the president's political protege whose reputation has been tarnished by a corruption scandal that has claimed victims across the political spectrum, including Ms Bachelet's own son who is accused of abusing his power to secure a bank loan for a lucrative property deal.

"There is a . . . signal that Bachelet has opted to prioritise putting the political house in order over a greater push for reform," says Robert Funk, a political scientist at the University of Chile, who argues that new ministers are "not likely to push a very radical agenda" in the process of constitutional reform that Ms Bachelet announced last month will begin in September.

The appointment of Mr Valdes and the reinstatement of the rest of the economic team is likely to please markets. Mr Funk says Ms Bachelet avoided alienating the leftwing of her diverse coalition by not bringing back figures from the past such as Jose Miguel Insulza, former head of the Organisation of American States, as some had speculated.

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The changes follows Ms Bachelet's much-criticised surprise announcement in an interview with a local television station on Wednesday that she had requested the resignation of her entire cabinet, and that she would give herself until Saturday to announce a new team.

Maria Luisa Palomino, an analyst at Eurasia Group, said the reshuffle would help Ms Bachelet refocus attention from the scandals to pending reforms aimed at tackling pervasive inequality. They include an overhaul of the constitution, a bill under discussion that strengthens the role of trade unions, and further changes to the education system.

"Though unlikely to lead to a significant rebound in Bachelet's popularity, the cabinet reshuffle will provide some respite to the government, and signals Bachelet's willingness to redirect the attention to her reform agenda," said Ms Palomino.

The president's approval ratings have been steadily declining since she took office in March last year, with local pollster Adimark putting Ms Bachelet's popularity in April at 31 per cent. That contrasts with approval ratings of more than 80 per cent when she left office after her first term as president in 2010.

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