Appetite for reform remains strong, but the path forward is not yet clear
Firms should closely track the aftermath of the plebiscite, as it is likely to continue to push the Boric administration to the center. Once the dust settles, firms should expect pressure for reform alternatives to build, leading to heightened uncertainty and interrupting the current CLP rally. While we do not expect social unrest to erupt in the next few weeks, the longer the lead-up to a reform process, the higher the likelihood of disruptive protests.
Overview
As expected, Chile’s 2022 constitution was struck down in the September 4 referendum, with 62% of voters rejecting the proposed text and 38% voting in favor. Voters rejected the constitution across all of Chile’s 16 provinces and the Santiago metropolitan area, which tends to lean more progressive than other parts of the country. Of Chile’s 346 electoral districts, only 6 voted in favor of the 2022 constitution. The plebiscite also saw historic voter turnout, with over 13 million people turning up to the polls, far above the 8.3 million voters who participated in last year’s presidential election.
In a televised national speech, President Gabriel Boric, a longtime critic of Chile’s 1980 Constitution and supporter of the constitutional process, reiterated that the path to reform would continue despite the rejection of the constitutional text. Additionally, Boric has implemented a Cabinet reshuffle that has shifted his administration toward the center left.
Our View
The rejection of the 2022 draft constitution is not the end of the road; Chile will continue to experience heightened political and regulatory uncertainty over the next five years. While the constitution was struck down, appetite for reform remains strong, and the Boric administration will continue to push a more expansive government agenda. The path forward is not yet clear. Implementing targeted social reforms through Congress would be the least disruptive alternative; however, the government is likely to push for another constituent assembly or alternate constitutional reform process.
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