The election results led to a rally in the peso and strengthened Chilean government bonds. Still, firms should expect continued short-term volatility as Kast and Boric kick off their second-round campaigns, which will likely erode investment and the currency. Firms should monitor this election closely, as business implications will differ significantly depending on which of the candidates wins the election; a Boric win may offer more short-term social stability but could impact Chile’s investment attractiveness and lead to a more challenging regulatory environment with higher tax burdens. Kast, on the other hand, is likely to implement business-friendly policies, but may face significant governability challenges that could also deter short-term investment.
Overview
Chile held its presidential election on November 21. As expected, the election will move to a second round on December 19 between the two frontrunners: rightwing candidate Jose Antonio Kast and leftwing candidate Gabriel Boric. Kast led the vote in the election, with 27.9%, followed closely by Boric, who secured 25.8%. Economist Franco Parisi surprised by securing 12.8% of the vote, just ahead of center-right Sebastian Sichel (12.79%) and center-left Yasna Provoste (11.6%). Turnout was under 50%, similar to previous presidential elections since Chile lifted its mandatory voting law. After conceding, Sichel announced that he would not endorse Boric and instead would be open to dialogue with Kast. Provoste, on the other hand, has yet to endorse either candidate but is widely expected to campaign for Boric. Parisi remains the wild card; while his policy positions tend to align more closely with Kast than Boric, he has yet to openly support either of the candidates, and it is not yet clear who his supporters might vote for during the second round.
Our View
Our view is still that Kast will defeat Boric in the second round; however, it is likely to be a close election. To date, no candidate who came second in the first round has ever taken the presidency in the runoff, but the margins between Kast and Boric are tighter than any previous recent election. Neither of the two candidates was able to secure 30% of the vote, which suggests that they will both need to moderate in order to gain broader support in the runoff, a task that might be easier for Kast than Boric, who heads a wide-ranging coalition, including the far left. Still, in addition to his commitment to Chile’s current economic and political model, Kast’s focus on prioritizing order and stability after a volatile few years following the 2019 social upheaval and the COVID-19 pandemic is likely to give him the edge over Boric in the runoff.
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