Chile’s opposition conservatives dealt a significant blow to the government of Gabriel Boric, in an election upset that undermines the president’s progressive agenda and sets up a potential rally in local assets.
Lists of right-wing candidates won 33 seats Sunday in voting to a council charged with drafting a new constitution, more than the three-fifths majority needed to push through articles at will, according to electoral body Servel. Leftist contenders obtained 17 spots, while one seat went to an indigenous representative.
The result amounts to a political sea-change in the South American nation as it tacks back to the right, roughly three years after civil unrest brought much of the country to a standstill amid demands for greater equality and improved social services.
It also marks a further setback to Boric, 37, who rode the wave of public anger to the presidency on a platform of change that included overhauling the country’s constitution stemming from the era of dictator Augusto Pinochet.
A prior attempt to rewrite the charter was overwhelmingly rejected in a September referendum out of voter concerns that it went too far to the left, uprooting the foundations of Chile’s free-market economy, giving indigenous groups greater autonomy and weakening political checks and balances. With Sunday’s vote removing the remaining concerns over radical changes to the constitution, Chilean assets are poised for a rally.
The result will see “strengthening in the Chilean peso, a rise in the stock market and a drop in short-term swap rates,” said Jorge Selaive, chief economist at Scotiabank Chile. At the same time, he added, “it will create enormous challenges to political dialogue.”
The poor results for the government are down to Boric’s mismanagement and his inability to take care of the more pressing need of people’s day-to-day problems, said Kenneth Bunker, a political analyst at consulting firm Politico Tech Global. “Today people are much more concerned about security, immigration and the economy,” Bunker said.
Partido Republicano
The results confirm the rise of the ultra-conservative Partido Republicano, whose list won the most votes to the Constitutional Council even as it criticizes the planned rewrite. After eclipsing traditional right-wing parties, the outcome will stoke expectations that the party’s founder, Jose Antonio Kast, will again run for Chile’s presidency after he lost to Boric in 2021.
“Today we will start to reconstruct and recover our country,” Kast said in televised remarks. “Today Chile has also defeated a failed government.”
The election serves as a harsh reality check for Boric’s left-wing administration as it seeks to revive its agenda, including plans to increase taxes on the rich, lift pensions and strengthen public services.
“The previous attempt failed, among other reasons, because we weren’t able to listen to people who thought differently,” Boric said late Sunday. “I want to invite the Partido Republicano, which obtained an unquestionable majority, to not commit the same error that we made.”
The elected body will take up work on an outline of the new constitution written by a committee of 24 experts chosen by congress earlier this year. It will be able to approve and modify articles over a period of four months starting in June.
Voters will decide whether to back or reject the proposed new charter in a national referendum planned for Dec. 17.
Sunday’s results may anger many on the left who had demanded a new constitution to placate the social uprising in late 2019, exacerbating the country’s political divisions. That push for change led to Boric’s rise from student protest leader to head of state.
“The likelihood of rejection in the referendum is higher than ever, because the center-left was excluded,” said Klaus Kaempfe, portfolio solutions director at Credicorp Capital. “The market will react positively to the result, but this effect will fade over time both because government reforms will be more important and because of the likelihood of a rejected draft at year’s end.”
--With assistance from Ian Fisher.
©2023 Bloomberg L.P.
