Economic and political turbulence on the horizon of the leftist Boric in Chile

With no majority in Congress to carry out his projects, with economic problems on the horizon and the task of healing a society that emerges battered from a polarized campaign, Chile’s newly elected president, the leftist Gabriel Boric, faces an uphill road.

Experts say that one of the first tasks of Boric, whom his detractors call “communist”, Will be to reassure the financial markets about the stability of one of the largest economies in Latin America.

Boric, 35, promised in his campaign to promote a “Welfare state“In one of the countries with the greatest social inequality in the world, a gap in the origin of the so-called”social outbreak”Of 2019 that shook the country and its economy.

Following his election on Sunday, he promised “expand social rights“But keeping the”fiscal responsibility ”. “We will do it taking care of our macroeconomics“, He said.

Even if he wanted to push for radical changes to the Chilean neoliberal economic model, it would be difficult for the young president to convince Congress, which is evenly divided between left and right parties.

“Governing will be very, very difficult“, he pointed Michael Shifter, from the Inter-American Dialogue analysis center in Washington. The new president “will have to negotiate and make agreements and alliances”, He estimated.

This could weaken its appeal among Boric supporters with high expectations for quick turnaround.

“They might get frustrated, and then it would not only be discontent on the right and distrust on the right, but also disappointment on their own base.”, He estimated Shifter.

“Heal a nation”

The turnout in Sunday’s ballot (55.4% according to official projections) was a record in a country with high abstention and with a central electorate that was orphaned of candidates when Boric and the right-wing José Antonio Kast were rivals in the ballot.

Even among those who supported Boric’s socially liberal policies and his promises of socioeconomic change, there were suspicions of his political alliance with the Communist Party.

Many voters said they would vote for “the lesser evil” Come in Boric and Kast, a defender of the dictator Augusto Pinochet (1973-1990). “Boric will have to heal a nation”Declared Patricio Navia of New York University.

“But the process of drafting a new Constitution is still underway and there will be a plebiscite on the new Constitution in less than a year. So I don’t think there is much time to heal. 2022 will be a tough year”He added.

A convention dominated by leftist representatives drafts a new Constitution to replace the one approved under the Pinochet regime, which is credited with Chile’s relative economic well-being, but is also blamed for strong social inequality.

1% of Chileans own 25% of the wealth, according to a UN body.

The new Constitution – a response to the 2019 protests – will be put to a vote next year.

Economic slowdown

Meanwhile, all eyes will be on the markets on Monday. “It may be that there are people who take their money out of Chile and investors who do not arrive, that would affect the economy and then you will see people in the streets”Estimated Shifter.

After a fall in the Gross Domestic Product (GDP) of 5.8% in 2020 due to the restrictions imposed by the coronavirus pandemic, Chile ends 2021 with a growth projection of 11.5%.

But 2022 is likely to be a bit tougher, with an announced slowdown, as the echoes of the pandemic continue.

“The government will undoubtedly face difficulties due to the economic situation, a sharp slowdown is expected in the coming years“, he pointed María Jaraquemada, of the Institute for Democracy and Electoral Assistance.

Much of the recent growth was fueled by government aid of about $ 3 billion to stimulate an economy ravaged by the pandemic, and by early withdrawals from private pension funds of about $ 50 billion.

Passed by Congress under strong pressure from public opinion, the withdrawals are a short-term poverty alleviation measure that will leave millions of Chileans with far less than anticipated retirement.

The Central Bank of Chile has already raised the interest rate twice since October, by 1.25 percentage points each time.

Now, at 4%, it is expected to rise again in 2022 to contain inflation – which would close the year at 6%, double the goal.

Government aid will also cease in December.

The new president “will take charge of a complex macroeconomic scenario, in which it will have to manage the withdrawal of the fiscal stimulus“Said Juan Ortiz, from the Faculty of Economics Diego Portales placeholder image.

Boric it has promised to control the fiscal debt, which in June reached 33% of GDP.