After the elections for constitutional councilors on Sunday and the broad result obtained by the Republican Party, international economists are beginning to do their reading on the matter.
From Credicorp Capital they point out that yesterday’s result “is a great victory for the hard right”, predicting the probability that they will control the constitutional agenda given their veto power.
“We estimate that the composition of the Constitutional Council reduces the possibility of a radical constitution and supports a moderate discussion on sensitive issues,” they indicate in a report sent this morning to clients.
However, they point out that the willingness of the right-wing coalition to negotiate with the left could have a significant impact on the probability of rejecting a new magna carta in the plebiscite. “The population could perceive a new Constitution drawn up solely by right-wing parties without the need to reach a consensus with left-wing parties,” they say in the document.
On the other hand, JP Morgan also delivered his vision of the electoral process, through a report signed by his economist for the southern cone, Diego Pereira, in which he points out that his central scenario -although there could be surprises- is that the institutional design of the constituent process will contribute to offer a new minimalist Constitution, so that it obtains sufficient popular support in December and is approved”.
Regarding the economic effects, Credicorp Capital expects a “neutral to positive impact” on local assets, such as currency and equities.
Sunday’s result is read as a political defeat for President Gabriel Boric’s coalition, which won 28.5% of the vote, Pereira says.
“The fact that the opposition comes to dominate the Council adds to the recent defeat in the House when the tax reform was rejected, and raises the question of whether the leftist coalition will choose to moderate further to reach agreements in Congress, or it will go on the defensive at the cost of accepting a legislative deadlock and perpetuating uncertainty going forward,” says the economist.
Along these lines, he foresees that the discussion of the tax and pension reforms could be extended for a longer time, “possibly until well into next year.”
While Credicorp Capital points out that the impact of the constituent election will be felt in the policy agenda of the Executive branch. “A stronger opposition gains more bargaining power, which is likely to push for more restraint,” she says.
