Firms should engage in scenario planning, as the outcomes of Chile’s presidential and congressional elections are likely to heavily influence the country’s short- to medium-term outlook. A Boric win would likely lead to tax hikes, increased social spending, and an expanded role of the state in Chile’s economy, which could be beneficial to short-term GDP growth but boost regulatory uncertainty. If Kast becomes Chile’s next president, however, we are likely to see a government that prioritizes regulatory stability and aims to strengthen operating conditions for MNCs. This is likely a net gain for MNCs in the medium to long term, but social upheaval and heightened constitutional uncertainty under Kast could weigh on Chile’s 2022 recovery.
Chile will hold its presidential election on November 21, with a second round scheduled for December 19. While we still anticipate that the election will go to a runoff between left-wing candidate Gabriel Boric and conservative candidate José Antonio Kast, our base case for the electoral outcome has changed, and we now believe that Kast will become Chile’s next president instead of Boric.
While the promise to address the root causes of the 2019 social unrest helped drive the Boric campaign, particularly given Boric’s key role in pushing to rewrite Chile’s constitution, voter concerns have shifted since then, and Kast has successfully presented himself as the candidate who will be able to restore order to Chile after a chaotic few years, a proposition that has resonated with many voters.
Kast’s meteoric rise in the polls—pollster CADEM listed Kast at 7% support in late July, and now lists him as 25%, above frontrunner Boric, who is at 19%—has largely stemmed from his performance in the presidential debates and his ability to connect with many Chilean voters, who are seeking an end to the turmoil caused by the 2019 protests and the COVID-19 pandemic. According to CADEM, Kast is seen as better placed than Boric to address the most urgent voter concerns, which include crime, inflation, and economic recovery, and about as likely as Boric to fix Chile’s ailing pension system.
A Kast win alters our overall view for Chile in 2022. While Kast is more likely to precede over a business-friendly government, his win may generate backlash among left-leaning voters, likely leading to another outbreak of social unrest after the elections. Additionally, Chile is currently undergoing a constitutional process to redraft Chile’s 1980 Constitution, led by a left-leaning constituent assembly that is likely to clash with a Kast presidency. Chile’s legislative elections, which also take place on November 21, are key as well, because the composition of Congress will influence the implementation of new constitutional articles (assuming the new Constitution is approved next year).
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