Chilean peso reverses initial rise after right-wing victory in constitutional vote

He Chilean peso It gave up early gains and fell towards the end of the day, a day after the far-right and center-right parties won a majority of the seats in a council that will be in charge of drafting a new constitution for the country.

After noon, the local currency fell 0.23% to 795.50/795.80 pesos per dollar. At the beginning of the session, the local currency had strengthened 0.66% in response to the electoral result.

In Sunday’s vote, the far-right and center-right opposition parties won 34 of the council’s 50 seats, after a later adjustment of the counts, in a sharp reversal from the progressive majority that drafted an unsuccessful first bill, something that the economists consider beneficial for local assets, at least in the short term.

However, doubts remained as to whether cross-party dialogue would be achieved for a new draft to gain sufficient popular support.

Constitutional councilors elected on Sunday will begin drafting a new constitution in June, and voters will approve or reject it 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.”, said the Scotiabank economists.

The first version, drafted by largely leftist and independent constituents, was considered one of the most progressive constitutions in the world, but it too was rejected by voters in September.

andres abadiaChief Economist for Latin America at Pantheon MacroeconomicsHe said right-wing control of the council would lead to fewer political risks, helping keep financial metrics in check and supporting the local currency.

In statements to journalists after a government meeting, Finance Minister Mario Marcel said that he hoped that from now on, with the elections already held, progress could be made in the discussion of the tax reform promoted by the Executive and which was rejected by The congress.

“We imagine that now they can be reactivated (the talks) and with all this we will be able to start this process of dialogue around the tax reform in a more structured way.he declared.

“No one is helped by the indefinite postponement of issues as important as tax reform, pension reform or the constitutional process itself”, he added.

JPMorgan economists also said the results could be positive for investments.”if they manage well”, although they pointed out that the recent pendulum behavior of Chilean voters was a warning sign in the sense of ending the debate and allowing uncertainty to diminish.

“Our central scenario assumes that the institutional design of the constitutional process will help to offer a new minimalist Constitution, in order to obtain sufficient popular support in December.”, they pointed out. “(But) future political strategies could offer surprises”.

Source: Reuters