(Updates with Foxley comment, details)
SANTIAGO, March 12 Chilean President Michelle
Bachelet said on Thursday she was replacing her foreign and
defense ministers, as her ruling coalition heads into the
toughest election battle in two decades amid a global financial
Foreign Minister Alejandro Foxley had resigned his cabinet
post to rejoin a think-tank and will be replaced by the
country's ambassador to the United States, Mariano Fernandez,
Foxley's exit comes days after he became embroiled in
controversy in neighboring Peru, with which Chile has a
long-standing border dispute, for criticizing Peruvian
politicians who opposed a new free-trade pact between the two
In Lima, Peruvian Prime Minister Yehude Simon said Foxley's
exit would help improve bilateral relations, which have been
volatile since war in the late 19th century.
Bachelet said Foxley's decision to step down had been
discussed "some time ago".
She added she was appointing Government Minister and
spokesman Francisco Vidal as defense minister, replacing Jose
Goni, who will take up the role of ambassador to the United
"The times ahead, as we have said, will be tough and will
be decisive in successfully facing the economic crisis and its
impact on Chile and to make good on pledges to the people,"
Bachelet said in a televised address at the presidential
palace, paying tribute to both outgoing ministers.
"It is our duty to make the maximum effort to ensure these
dreams become reality," she added.
Lagging in the polls, Bachelet's ruling center-left
coalition faces a tough fight to retain its two-decade grip on
power in a presidential election due later this year thatanalysts expect to be a close call.
Center-right billionaire businessman Sebastian Pinera, who
lost a 2006 election run-off to Bachelet, is leading the field
according to opinion polls.
Former President Eduardo Frei has emerged as the main hope
of the leftist alliance that has ruled since the end of Chile's
1973-1990 dictatorship. Bachelet cannot run for re-election.
However, with Chile's economy widely regarded as one of the
most stable in Latin America, and lauded for fiscal prudence,
few expect major policy changes whoever wins.
(Reporting by Rodrigo Martinez, Manuel Farias, Bianca Frigiani
in Santiago and Teresa Cespedes in Lima, Writing by Simon
Gardner, editing by Philip Barbara)