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What’s Happening in Chile?

11 Jun 2021
By Fernando Rodriguez
Chileans protest for a new constitution, photographer  jose pereira, sourced from ECPR's Political Science Blog,

A Constitutional Assembly has been elected in Chile to replace the 1980 Constitution, written under the dictatorship of Augusto Pinochet. The new social contract will alter the nation’s fundamental values. 

In mid-May, citizens of Chile elected a Constitutional Assembly with 155 delegates. The assembly will conduct its deliberations for up to a maximum of twelve months, crafting the nation’s new Magna Carta.

On 2 June, President Sebastián Piñera declared his support for a marriage equality bill, reversing his prior resistance to the issue. The bill had previously been proposed by President Michelle Bachelet in 2017. The shift could be interpreted as a concession to the changing political winds, but congressmen of Piñera’s party accused him of treason, and the Catholic Church put out a lengthy statement against the measure.

The notion of a new constitution for the country initially alarmed foreign-owned businesses operating in Chile, and the peso took a dive during the unrest experienced in the streets towards the end of 2019. In contrast, the result of the ensuing plebiscite in October 2020 confirming the change to the constitution resulted in the return of stability on the streets, and foreign investors took well to this stability. The plebiscite allowed for the resounding voice to be heard, and Chile now seems to be in a better position to weather whatever uncertainty might come with the new Constitution.

Last month, the country went to the polls again, and the authors of the new constitution were elected. President Sebastían Piñera’s centre-right coalition party Chile Vamos won just 37 of the 155 seats, effectively 23 percent of the total voting power, leaving the party without veto power in the discussion of new articles of the Constitution. Independents surged in the election of the assembly, winning 48 seats.

The assembly includes an equal number of men and women, an unprecedented development in world history, as approved by Congress. Another seventeen seats were reserved for Chile’s indigenous community who were left out of the current Constitution. The leader of the far-left Broad Front Coalition has called for a “new treaty” with the country’s indigenous population, to “recover” the country’s natural resources, including, land, mining, and water rights.

However, only 43 percent of the population participated in these elections, although they were billed as the most important in recent history. Nevertheless, without new allies, the election results guarantee that Chile Vamos will be unable to block radical changes to the constitutional framework.

The Pinochet Constitution enshrined the dominance of private capital and required supermajorities to amend. For the next draft, fundamental changes to the political system or breaking international agreements are off the table. However, the form of government, including the extent of decentralisation or regionalisation, the model of economic development, the level of popular participation in government, and pluralism in society will be under discussion. Points of contention for the progressive left will be civil rights, healthcare, and education, which may lead to horse-trading over such economic issues as central bank independence.

In view of the party’s losses in the election, Marcela Cubillos, a major figure in Chile Vamos who was elected to a seat in the assembly, announced that the party would be looking to make new alliances in pursuit of limiting the inclusion of radical changes. On the other side, Alondra Carrillo Vidal, a former spokeswoman of the 8M Chilean women’s movement who also won a seat, rejected talks aimed at alliances with Chile Vamos, saying “We are not going to delegate our voice to those who claim to represent us.”

The process of drafting a new Constitution carries the risk of rearranging public assets and social goods in a way that destabilises the state and the economy, setting unrealistic standards for public investment and squandering resource wealth through political corruption, as seen in Venezuela. This potential for destabilisation is discounted by progressives who argue that offering rights and public resources to more people does not inherently mean that others lose rights or that public assets will become exhausted and private enterprises destroyed.

The former undersecretary of mining argued as much, saying, “It isn’t about how we cut the cake [mining income] to face the inequality, but how we can enlarge the pie. The constitution could establish norms and principles for enabling legal mechanisms of public policy that allow better distribution.”

For mining companies, a recent bill to charge a 3-15 percent tax on profits, depending on the copper price, caused worries that Chile could lose its shine as the most solid investment in Latin America. However, most privately owned mines are shielded by international agreements with the Chilean state that prohibit tax rises.

Still, despite some issues being off the table and the heated disagreement between groups, none of which have sufficient seats to dominate, the new assembly is expected to push to decentralise power, redistribute wealth, and allow the state to intervene in the economy, discarding the traditional free-market model.

Those in the business community are divided. A large Spanish infrastructure company assured in a high-level conference between Spain and Chile that the latter is still the best investment in the region and “will come out with a good Constitution.”

Fernando Rodriguez is based in Santiago, Chile.  He is a Senior Partner at Stanton Chase where he leads the Natural Resources and Energy practice for Latin America.  He holds a degree in economics and a Master’s degree in International Trade from Monash University in Australia.

This article is published under a Creative Commons Licence and may be republished with attribution.