Market tensions appear in Chile in the face of election winds of change

RIO DE JANEIRO, BRAZIL – The markets reacted adversely on Monday, May 17, to the result of the constituent elections in Chile, at the same time that some citizens celebrated how the convention that will draft a new Magna Carta was formed, with low representation of the right-wing that will not be able to prevent changes to the country’s model.

The Santiago Stock Exchange ended the day with a fall of 9.3%, the biggest drop since the state of alarm was declared due to the pandemic in March of last year, while the exchange market also reacted with pessimism and the Chilean peso went from 700 to 716 units for each dollar, the worst decline of the local currency in the last 11 months.

The black Monday of the stock markets contrasted with the optimism of some citizens, who celebrated the results and the window of opportunity they may represent to build a country of greater social justice.

“I hope that the irruption of the independents will be a favorable change. We don’t want the same people as always, and that was reflected in the votes,” Chilean citizen Marcela Acevedo told Efe.

Another Santiago resident, Fernando Gómez, said that “Chile is already asking for greater changes” and expressed his wish that in the debate on the new Constitution, “things will be done in a focused and calm way to be able to reach those changes.”

Experts such as the director of the Universidad Mayor Business School, Francisco Catañeda, told Efe that “there is no doubt” that “changes are coming” and that these represent “a window of opportunity” but “also a risk for the economy”, both for large business groups and for small and medium-sized companies, whose “financing is going to become more expensive”.

“Possibly all this context can accelerate the outflow of capital, which will obviously affect the stock market and the dollar, and there will be more inflation. I see a complex economic situation a year from now when the constituent assembly closes,” he said.

Castañeda considered that the results of the elections left Chile “under tension” and that what is expected is “a certain maturity” in the constituent body to “reach the necessary social agreements and advance in reducing the gaps”, but maintaining “the productive and entrepreneurial strength”.

THE WINDOW FOR SOCIAL CHANGES

The Chilean right-wing aspired to obtain at least one-third of the representation in that body, a percentage that would have given it the capacity to negotiate to contain the scope of the changes and veto power to prevent the new Fundamental Law from including norms opposed to its postulates, but it only obtained 37 seats.

With this loss of ground, the way was clear for the big winners of the elections, the candidacies of independent citizens outside political parties, mostly progressive, to draw, together with the left-wing opposition, a model of a nation that takes into account their concerns, with a strong component of social justice.

With their 48 seats, the independents are the first force in the convention and hold the key to promote the changes. Still, they will not be able to do it alone since they do not reach the two-thirds of the representation proportion necessary to approve each norm to be included in the new Constitution.

Big negotiations to approve the provisions of the new Constitution could be the norm, given the heterogeneity of all the lists that achieved representation, an element that could limit the scope of the changes.

“A Constitution does not have to be of the left; it has to be a Constitution that represents the majority of Chilean men and women. If it has a strong social component, of course, it does,”, said, for example, lawyer Daniel Stingo, the most voted constituent convention candidate, who presented himself as an independent but within the list of the left-wing party Revolución Democrática.

The convention will start working between the end of June and the beginning of July and will have a maximum of 12 months to draft the Constitution, a time of debate that will pass under the watchful eye of citizens and the markets.