If the constitution is rejected, Chile would revert to its previous magna carta, which has high rejection levels
Firms should closely monitor debates surrounding alternatives if the 2022 constitution does not pass, which is an increasingly likely outcome. Still, MNCs should closely follow articles within the draft constitution that have gained popular support, mainly those surrounding expanded social rights, which will help firms in the B2B space assess which sectors could benefit from an increased role of government and additional public spending. Even if Chile does revert to the 1980 constitution after the vote, it is unlikely to remain in place long term, and efforts to expand healthcare and education access, among other social rights, are likely to persist.
Overview
Recent polls suggest that the new constitution, which is still being drafted by Chile’s constituent assembly, will not pass in the September exit referendum. As the assembly nears the end of the drafting process, rejection for the 2022 constitution has risen to around 46% after starting the year at 33%, per CADEM. Given that almost 80% of Chileans supported the constitutional process in the October 2020 plebiscite, these results are jarring. Still, trust in the process began to decline after May 2021, when the 155 members of the constitutional convention were elected. Low turnout led to a convention that heavily favored independents and the left and lower representation from the right, which retains strong levels of support among key segments of the Chilean public.
The process has been messy and convoluted from the start, and many proposals have spooked voters, particularly since the assembly took on an overtly political tone in its early days. While the assembly has approved key social rights that are broadly favored by the Chilean population, such as healthcare and education access, it has also sought to alter other aspects of Chile’s political and economic model that have been more controversial, for instance, the recent decision to replace Chile’s Senate with a chamber of regions.
With over 300 articles approved to date, the constituent assembly’s May 6 deadline to vote on all draft articles is rapidly approaching. The document will then move to the “harmonization” committee to ensure that articles do not contradict each other prior to finalizing and releasing the draft by July 4. This will give the “approve” and “reject” camps two months to make their case to the population before the exit referendum on September 4.
Our View
While the proposal to rewrite the constitution received overwhelming support after the 2019 protests, the process has been less encouraging in the cold light of day. Unfortunately, no concrete plan B was baked into law 21.200, which established the constitutional process, if the text did not pass. Therefore, if the 2022 constitution is struck down in the September referendum, the country will revert to the 1980 constitution, even though the former magna carta lost credibility in the October 2020 plebiscite and retains high rejection levels.
Alternative proposals are emerging from both the Boric administration and other political actors. The government could look at adding a third option in the exit referendum, for instance, allowing voters to vote “no” on the current draft, but express support for seeking another constitutional alternative. Another potential alternative would include pushing Congress to vote on and codify the social rights that have been approved in the draft constitution, though this would be tough within the framework of the 1980 constitution. Yet another pathway would include reviving the Michele Bachelet 2018 constitutional project. If support for the 2022 constitution continues to decline once its contents are finalized, it is likely that these proposals will gain additional traction, prolonging uncertainty, but likely leading to a more favorable outcome to the constitutional process.
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