Chilean president's family caught up in loan scandal

By Rosalba O'Brien

SANTIAGO, Feb 10 (Reuters) - Members of Chilean President Michelle Bachelet's family were given privileged access to a bank loan, the government acknowledged this week, a revelation that threatens to weaken the government's popularity and undermine scandal-weary Chileans' trust in politicians.

Bachelet's daughter-in-law, Natalia Compagnon, obtained a loan worth around $10 million to buy land on behalf of a company in which she owns a 50 percent stake, news magazine Que Pasa first reported last week.

Compagnon clinched the loan during the 2013 election campaign after meeting with Banco de Chile vice-president Andronico Luksic, one of Chile's wealthiest men and a member of the family that controls the bank. Bachelet's son and Compagnon's husband, Sebastian Davalos, was also present at the meeting.

The land in question is now being sold at a profit of about 3 billion pesos ($4.79 million).

Although there is no indication that anything illegal took place, the claims have caused waves in Chile and triggered accusations from the opposition that Compagnon and Davalos took advantage of their family's position to obtain credit and make money.

The center-left government's acting finance minister, Alejandro Micco, said in an interview with local radio station ADN that there was "nothing irregular" about the loan, but added: "Without doubt not everyone has access to the president of the bank."

The revelations will not help Bachelet, who already has her hands full pushing through an ambitious and at times controversial reform agenda against the backdrop of a slowing economy.

The president, who is on vacation during the parliamentary summer recess, has not commented.

But her son will likely have to resign from his position as her representative at the head of a charitable foundation, political analyst Pablo Salvat said.

"Will it affect (Bachelet's) popularity? Probably. We mustn't forget we're in a climate of general unease and discredit of the political elite," Salvat said.

Although Chile is usually regarded as having low levels of corruption by Latin American standards, the events come hot on the heels of a campaign financing scandal that has hurt the popularity of the right-wing opposition.

Analysts said trust in the main political parties, which recent polls have shown is in decline, will likely be eroded further.

"For the skeptics this is confirmation of the common-sense perception that the ethics framework is insufficient and affects everyone, and it undermines institutional value and credibility," political analyst Guillermo Holzmann said.

($1=626.2600 pesos) (Reporting by Rosalba O'Brien; Editing by Peter Galloway)

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