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Chile Elects Right-Wing Council to Draft New Constitution

Stocks rise as investors expect country to keep market-friendly model

President Gabriel Boric preparing to cast his vote for the constitutional council over the weekend. [PHOTO: ANDRES POBLETE/ASSOCIATED PRESS]

Chilean stocks gained on Monday after voters elected a right-wing council that is expected to draft a constitution that will maintain the country’s market-based economic model.

The results were a major blow to leftist President Gabriel Boric by voters scared off by an earlier left-wing constituent assembly that proposed a sweeping overhaul to Chile’s political and economic system. Mr. Boric’s popularity has also declined over his government’s handling of crime, immigration and a weak economy. Chile’s economy is expected to contract 1% this year, the only South American nation projected to post an economic decline, according to the International Monetary Fund. On Sunday, conservatives took 34 seats in the constitutional council, versus 16 seats for left-wing delegates and one seat for an indigenous candidate, according to the Servel electoral agency. That will give right-wing delegates more than the three-fifths majority needed to make changes to the charter and block proposals from their leftist opponents.

The Santiago stock exchange rose 2.3% as investors became more confident that Chile wouldn’t make far-reaching changes to an economic model they credit for years of strong growth. Chile’s peso opened nearly 0.7% stronger against the U.S. dollar before ending slightly weaker.

Sunday’s election result was a sharp reversal from Chile’s first attempt to write a new constitution, which the country embarked on after violent protests in 2019 erupted over anger at the political class and demands for better pensions, education and healthcare.

In 2021, Chileans overwhelmingly elected a left-leaning assembly that backed a bigger state role in the economy, stronger protections for the environment and expanded indigenous rights to replace its dictatorship-era constitution. But Chileans last year rejected the assembly’s draft over concerns it would rein in the country’s market-friendly economy and change the balance of power in government.

A voter in Santiago, Chile. The election result was a sharp reversal from Chile’s first attempt to write a new constitution. [PHOTO: CRISTOBAL OLIVARES/BLOOMBERG NEWS]

That referendum was an early defeat for Mr. Boric, who took office months earlier after campaigning on a progressive platform that involved creating a state lithium company, boosting spending on pensions and expanding access to legal abortion.

The 51-member council elected on Sunday will work with a committee of experts to draft a new constitution to replace the current charter enacted in 1980 during the military dictatorship of Gen. Augusto Pinochet.

“This constitutional council is likely to design a constitution that is very similar to what we have now,” said Robert Funk, a political scientist at the University of Chile. “And on some issues it could be even more conservative.”

On Sunday, the big winner was the conservative Republican Party, a staunch supporter of the current constitution and whose leader, José Antonio Kast, lost to Mr. Boric in the 2021 presidential election. It will have 23 delegates in the constitutional council, making it the largest group.

The Republican Party has been a sharp opponent of Mr. Boric, especially his government’s handling of crime and immigration. The socially conservative party has opposed Mr. Boric’s support for legalizing abortion and called for the deportation of illegal migrants, whom the Republican Party has blamed for an increase in violent crime in the country of 19 million people.

“Chile has defeated a failed government that has been unable to confront the security, economic and social crisis,” said Mr. Kast. “Chileans have gone to the ballot box to give a strong and clear signal about the path that they want for our country.”

Mr. Boric urged the Republican Party to not make the same mistake as the left did during the first attempt to write a new constitution, when right-wing delegates said their proposals were ignored.

Chileans sent a signal ‘about the path that they want for our country,’ said José Antonio Kast, the head of the country’s conservative Republican Party. [PHOTO: ELVIS GONZALEZ/SHUTTERSTOCK]

“The previous process, and we should say this, failed because we didn’t know how to listen to those who think differently,” said Mr. Boric. “I encourage the Republican Party…to not commit the same mistake that we made.”

The council will begin working in June and Chileans will vote on approving its new constitution in a December referendum.

Patricio Navia, a Chilean political scientist at New York University, said Chileans could reject that constitution if they think it is too similar to the current charter.

“Chile might find it difficult to close out the constitution writing process,” he said.

He also noted that Sunday’s vote has weakened Mr. Boric even more, which could make it difficult for him to govern. His administration failed in March to win congressional approval for a key tax reform. Mr. Boric also came under fire last month from business leaders opposed to his state-led policy to develop Chile’s lithium reserves, the world’s biggest.

“Boric might struggle to get anything done,” said Mr. Navia. “A power vacuum will not contribute to a friendly environment for investment.”


(c) 2023, The Wall Street Journal



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