Social discontent and the ongoing process of rewriting the country’s constitution will form the backdrop for Chile’s November 2021 elections. While a new government and constitution could calm further major unrest, it could also drive changes to the country’s current pro-business landscape, writes Erin Drake.
Since Chileans’ social upheaval against inequality and other socio-economic grievances began in October 2019, the country’s political and economic future remains uncertain. Sporadic and occasionally violent protests still occur in Santiago and elsewhere while a constituent assembly rewrites the constitution, and the government prepares for general elections in November 2021. Amid ongoing calls for improved social welfare, Chile’s leftist coalition under the leadership of former student protest leader Gabriel Borić continues to grow in popularity. Borić’s platform remains more moderate than his competitors’, but his promises to focus efforts on welfare, decentralisation of the state and a more equitable division of Chile’s resources threaten to roll back Chile’s status as a favourable pro-market investment destination.
Borić, a leader of Chile’s 2011 student protests that formed a precursor to the 2019 unrest, has since spent the last decade in Congress. In the July primaries he won 60.4 percent of the vote to become the candidate for the Apruebo Dignidad left-wing coalition, on a platform of feminist policies, sustainable environmental practices and decentralising state control to enhance municipal power. Pitted against Borić in the November election will be Sebastián Sichel, who won 49 percent of the votes in the centre-right coalition’s primary, surpassing a more established ultra-conservative candidate to represent the governing Chile Vamos coalition. The victory of these comparatively moderate candidates, coupled with Communist Party candidate Daniel Jadue’s defeat and a low voter turnout for the traditional centre-left primaries in late August, suggest that voters have become disillusioned with mainstream parties, but remain reluctant to welcome radical economic and political reform. While Borić and Sichel remain the most popular candidates, polls show that there is no clear favourite for the presidency at present.
CAN A NEW GOVERNMENT RESTORE CALM?
It is unlikely that the election alone will be enough to assuage social discontent and dissuade further protests. Decades of structural inequality will not be rectified in the short-term and frustrations over socio-economic grievances, poverty, a lack of employment opportunities and equitable access to healthcare and education will linger. The new government will also struggle with the economic fallout of the pandemic, which has exacerbated existing frustrations. President Sebastian Piñera’s government allowed people to withdraw pension funds to mitigate the personal costs of the pandemic, but this could lead to a higher requirement for state support in later years. The electorate will look to the new government to address these issues.
The new government will certainly exceed the 10 percent approval rating of the Piñera administration, which represented the lowest approval rating for a Chilean president since the military rule of Augusto Pinochet. But distrust in the country’s leadership will remain. This could impede policy implementation, particularly if a new administration attempts to impose tax reforms for welfare programs or to offset the cost of the Covid-19 pandemic.
"Although a second wave of social unrest is unlikely in the coming months, the potential for sporadic unrest remains, particularly if the newly-elected government is perceived to be resting on their laurels, or if the new constitution fails to meet expectations."
Chile’s political, social and economic stability will also be tied to the content of the new constitution. Regardless of campaign promises, the next president – who will take office in March 2022 – will also have to implement any changes written in the new constitution, which will be subject to approval by a plebiscite in 2022. It is unclear what the constitution will entail, although it will likely challenge the existing privileges of the military and conservative elites, and focus heavily on human rights, education, equitable resource distribution and the protection of indigenous communities. While such changes are unlikely to address all grievances, they could prevent another round of mass protests in the long-term.
IMPLICATIONS FOR BUSINESS
While the November elections could ease social unrest and anti-government sentiment to an extent, economists and investors have raised concerns over what a potential leftist victory will mean for Chile’s investment landscape. An administration which champions an increase in public spending could introduce higher corporate taxes and stricter regulations for businesses, including more stringent mining legislation, environmental licensing laws, labour regulations, changes in collective bargaining legislation and indigenous consultation requirements. For example, Borić and his economic advisors view large companies as one source of structural inequality rejected by the 2019 unrest, and have proposed that workers comprise a portion of a company’s board of directors as a remedy to this. Borić’s labour policy will likely also include a minimum wage increase and a reduction in working hours. However, it is unclear how easily the president will be able to implement such policies; while the current constitution has created a strong presidency, the new constitution may seek to improve the balance of power among state institutions, and create a more representative system by limiting presidential powers.
The results of Chile’s primary elections indicate that the November vote is unlikely to usher in a government on the far end of either political spectrum. This means that the potential for radical political or economic change is limited. But Chile’s investment landscape could still see significant alterations to legislation that will likely prompt some changes in the way companies are expected to operate. Constitutional changes could further dampen the appeal of foreign investment in Chile, particularly if there are significant changes to laws governing major sectors such as mining or construction. Although a second wave of social unrest is unlikely in the coming months, the potential for sporadic unrest remains, particularly if the newly-elected government is perceived to be resting on their laurels, or if the new constitution fails to meet expectations.