Most polarised election in Chile since 1989

Chileans head to the polls this November in the most polarised presidential election since the return to democracy in 1989. The stakes of the presidential election are high as it is happening in parallel with a constitutional rewriting process. The next president will play a key role in either encouraging radical constitutional reform or acting as a bulwark against it. Currently, the frontrunner in the race is Gabriel Boric of the left-wing Apruebo Dignidad (AD) coalition with Sebastián Sichel of the governing centre-right Chile Vamos (CV) coalition and Yasna Provoste of the centre-left Nuevo Pacto Social (NPS) coalition not far behind. Owing to a large number of undecided voters and the possibility of outsider candidates on both the left and right to siphon away votes from the main candidates, it is still too early to say who will win the election. That said, it is all but certain that the election will go to a second round scheduled to be held in December.

Mr Boric’s political rise from radical student leader to presidential candidate mirrors the rise of a new generation of political leaders that have found their voice after the October 2019 social unrest. Mr Boric’s socially progressive stances and statist economic policies have allowed him to gain traction in the polls. A Boric administration would shift Chilean politics away from its ironclad commitment to orthodox economic policies towards more interventionist policies that would erode the country’s business environment–the best in Latin America. A Boric administration would oversee a substantial expansion of fiscal spending to increase the public provision and quality of healthcare and education. Mr Boric would also upend the private pension system, an important source of financing for Chilean firms, replacing it with a public-run system. Mr Boric would finance this by increasing taxes and introducing higher royalties on the mining sector. Labour market rigidities would also likely increase as the government would boost the power of unions. We expect that Mr Boric will make it to the runoff.

Mr Sichel and Ms Provoste represent the centrist coalitions that have long ruled Chile, and we expect that should either win the presidency, the differences would be one of degree and not kind. Both candidates would raise social spending and taxes, but we expect that the business environment would remain the best in the region. The principal difference would be that Mr Sichel would eschew policies that would increase the regulatory burden on the private sector or reduce its role in the economy. Ms Provoste would split the difference between Mr Boric and Mr Sichel, introducing reforms that would increase the state’s provision of social services, increase taxation, and increase regulation, but without displacing the private sector’s central role in the economy. Although Mr Sichel is likely to make it to the runoff, José Antonio Kast of the right-wing Partido Republicano (PR), has been rising in the polls and could act as a spoiler for Mr Sichel, which would allow Ms Provoste to face off against Mr Boric.

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