Wed. Dec 1st, 2021

Chilean markets thrived on Monday after the results of the first round of the country’s presidential election showed a slight lead for ultra-conservative José Antonio Kast over his left-wing rival Gabriel Boric ahead of a decisive second round of voting next month.

Chile’s stock market rose 9.4 percent on Monday, the biggest single gain since March 2020, as investors welcomed the strong performance by center-right candidates in the polls.

The peso rose 3.5 percent against the dollar in early trading, its biggest intraday gain since November 2019. The country’s 5-year sovereign effects sharpened 6 basis points to 84bp.

Kast, a 55-year-old former congressman and father of nine, won 27.9 percent of the vote in the first round on Sunday, just ahead of his left-wing rival Gabriel Boric, with 25.8 percent.

Kast and Boric will be on the ballot when Chileans return to the polls on December 19 for the second round. If the results are similar, the right side seems to perform better than the left side by a small margin. Recent polls, however, have suggested that the round is too close to mention.

The third and fourth places in the first round were secured by middle-right candidates, in another promising sign for Kast. Economist Franco Parisi, who has run his entire campaign from Alabama in the US and has a large following on social media, was very surprised by finishing third.

The election was seen as a referendum on the Chilean economic model, which has produced some of the best growth in Latin America in recent decades, but failed to share the benefits widely among the population.

This is the first presidential vote since the outbreak, or explosion, of anti-government demonstrations in 2019, caused by tariff increases on the Santiago metro, which quickly escalated in anger over high cost of living and income inequality.

“Those who are poor die poor. The wealth of our country is poorly distributed, ”said Carolina Cavieres, a 35-year-old mother of two who cast her vote on Sunday in La Pintana, a working-class suburb south of Santiago.

Outside the polls, 50-year-old José Peredo, who moved to La Pintana in 1983 when it was still rural, pointed to the lines of cramped social housing overlooking a congested highway. He said Chileans were disillusioned because “[the elite] want all the cake for themselves. . . they promised us equality if we become a democracy, and look what we have ”.

The two leading candidates offered strongly different visions for the country’s future.

Kast campaigned on a platform to curb crime while defending free markets and traditional values. He spoke out against immigration, same-sex marriage and abortion, and called on Chilean voters alienated by the left, promising to restore order and reduce taxes among his new nationalist Republican party.

Boric is a 35-year-old congressman and former student leader. He promised to scrap the private pension system and bury the country’s “neoliberal” past of market-oriented policies that have failed to curb social divisions. He is part of a broad left-wing coalition that includes the Chilean Communist Party.

Boric, who if elected would become the country’s youngest president in more than two centuries, described the so-called Chilean miracle as “only for the outside world, not for us”.

Gabriel Boric cast his vote on Sunday. He is part of a broad left-wing coalition that includes the Chilean Communist Party © JOSE MIGUEL CARDENAS / EPA-EFE / Shutterstock

After Sunday’s first round, the risks of an “interventionist left-wing government” have diminished, Nikhil Sanghani, Latin American economist at Capital Economics, told the Financial Times.

The Congress is now divided with no clear majority secured by either side, which can act as a moderating force. “Markets’ first reaction was definitely positive. It has less to do with the presidential side and more to do with Congress, ”said Mary-Therese Barton, head of emerging debt at Pictet Asset Management. She said the results would force Boric to soften his policies so that his coalition could conquer part of the center.

It is a sharp turnaround in voter sentiment from May, when millions of Chileans overwhelmingly voted in favor of left-wing independents during elections to the Constitutional Assembly. That body has the task of rewriting the current deeply divisive constitution, which was adopted in 1980 in the middle of General Augusto Pinochet’s rule.

Kast spoke out against the rewriting of the country’s dictatorship-era constitution, which will be voted on as early as next year.

The constitution benefits private enterprise, which according to its supporters has driven the country’s strong growth and lifted millions out of poverty. But for many, it represents a direct link with the dictatorship, despite numerous amendments.

The two houses will have to approve a new draft of the current constitution, which will be put to a referendum in the third quarter of next year.

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