Chilean assets gained Monday after opposition conservatives dealt a significant blow to the progressive agenda of President Gabriel Boric.
(Bloomberg) — Chilean assets gained Monday after opposition conservatives dealt a significant blow to the progressive agenda of President Gabriel Boric.
The Chilean peso strengthened as much as 0.8% to 788.08 per dollar, while the yield on the 1-year nominal interest rate swap fell 9 basis points to 9.88%, its lowest in more than a month. Interest rates also got a boost after the National Statistics Institute reported that inflation fell below 10% year-on-year for the first time in more than a year.
Lists of right-wing candidates won 33 seats Sunday in voting to a council charged with drafting a new constitution, more than the three-fifths majority needed to push through articles without the support of the left. While the vote doesn’t change the balance of power in congress, it will embolden the right in its opposition to proposals to raise taxes and limit the role of private industry in pensions and health care.
“This vote had been discounted in the market, but not in the magnitude of the results obtained,” Santiago-based brokerage firm Tanner said in a note to clients Monday.
The result is a setback to the former student leader Boric, 37, who rode a wave of public anger to the presidency on a platform of change that included overhauling the country’s constitution dating from the era of dictator Augusto Pinochet.
A prior attempt to rewrite the charter was overwhelmingly rejected in a September referendum out of voter concerns that it went too far to the left, uprooting the foundations of Chile’s free-market economy, giving indigenous groups greater autonomy and weakening political checks and balances.
Sunday’s win for the right squashes any remaining fears of a second attempt at radical change in the country. But this is not the end of the process. The next draft of the charter must be put to a national referendum in December.
“The positive evolution of local assets in the medium-term will depend on the ability of the Constitutional Council to draft a Constitution that can be approved in the next electoral process,” Scotiabank economist Anibal Alarcon said in a note.
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