Chile’s right-leaning parties have 34 of the 51 seats in the new constitutional council
On May 7, Chilean citizens elected a new constitutional council, giving right-wing parties a majority of votes to draft a new constitution. The election marked a significant shift from the previous progressive majority and highlighted the challenges facing the President Gabriel Boric’s administration in pushing its agenda. Clients should closely monitor the new council’s discussions and maintain solid relationships with politicians to advocate for more growth-oriented reforms. Despite the ongoing political uncertainty, the Chilean peso is strengthening, lowering pressures on margins for MNCs and importers. Since Chile will enter a recession, companies should focus on implementing cost-cutting strategies instead of increasing prices to prevent further decline in consumer demand.
Overview
- Nearly 36% of voters supported the far-right Republican Party of former presidential candidate Jose Antonio Kast. The party secured 23 of 51 seats on the new constitutional council, while the center-right Chile Seguro received 21% of the votes and won 11 seats.
- Unidad para Chile, which aligns with the country’s center-left political parties, gained 28% of the votes and secured fewer than one-third of the total seats. Therefore, the party won’t have the power to block any right-wing proposals.
- Partido de la Gente, a populist movement led by economist Franco Parisi, only received 5.4% of the vote and failed to secure any seats on the council.
- Voter turnout was 84.9% of eligible Chileans, slightly lower than the 2022 constitutional referendum (86.8%). As expected, mandatory voting increased participation compared to previous elections. For example, turnout in the 2021 presidential election was lower than 50%.
Our View
The Republican Party’s prior commitment to maintaining the current constitution will keep political uncertainty high and increase the likelihood of a rejected draft, which could negatively impact business confidence in the upcoming months. However, we expect that the Republican Party will present a more market-friendly and moderate draft constitution compared to the one rejected via referendum last year. We believe the party will seek to avoid a rejection of its draft and capitalize on a potential approval to boost the party’s chances in the 2025 presidential election. Our 2023 GDP forecast remains unchanged at -1.0% YOY, amid lower consumer spending (-2.5% YOY) and private investment (-3.1% YOY).
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