Chilean voters give conservatives an edge ahead of run-off

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Chilean markets rebounded on Monday after results of the first round of the country’s presidential election showed a slight lead for ultra-conservative Jose Antonio Caste over his left-wing rival Gabriel Boric ahead of a crucial second round of voting next month.

Chile’s stock market rose 9.4 percent on Monday, the biggest single gain since March 2020, as investors welcomed the strong performance of center-right candidates in opinion polls.

The peso rose 3.5 percent against the dollar in early trade, its biggest intraday gain since November 2019. The country’s 5-year sovereign bond tightened 6 basis points to 84 basis points.

Cast, a 55-year-old former congressman and father of nine, took 27.9 percent of the vote in Sunday’s first round, narrowly ahead of his left-wing challenger Gabriel Borich with 25.8 percent.

Cast and Borek will be on the ballot when the Chileans return to the polls on December 19 for the second round. If the results are similar, it appears that the right outperforms the left by a small margin. However, the latest polls have indicated that the run-off is very close to confrontation.

Third and fourth places in the first round were taken by centre-right candidates, in another promising sign for Caste. Economist Franco Baresi, who campaigned entirely from Alabama in the US and has a large following on social media, surprised many by taking the third place.

The election is seen as a referendum on the Chilean economic model, which has had some of the best growth rates in Latin America in recent decades, but has failed to share the benefits widely among the population.

It’s the first presidential ballot since estallido, or the explosion of anti-government demonstrations in 2019, sparked by price hikes in Santiago’s metro, that quickly escalated into anger at the rising cost of living and income inequality.

“Those poor people die poor. The fortunes of our country are poorly distributed,” said Carolina Cavers, a 35-year-old mother of two who voted Sunday in La Pintana, a labor-inhabited suburb south of Santiago.

Outside the polling station, 50-year-old Jose Peredo, who moved to La Pintana in 1983 when it was still rural, pointed toward the lines of narrow social housing overlooking a busy highway. He said the Chileans were disappointed because “[the elite] They want all the cake for themselves. . . They promised us equality if we became a democracy, and look what we have.”

The two leading candidates offered very different visions of the country’s future.

Kast campaigned on a crime-suppression platform while championing free markets and traditional values. He has spoken out against immigration, same-sex marriage and abortion and has appealed to single Chilean voters from the left, promising to restore order and cut taxes under his new nationalist Republican Party.

Borek is a 35-year-old congressman and former student leader. He has vowed to abolish the private pension system and bury the country’s “neoliberal” past of market-oriented policies that have failed to narrow social divisions. He is running as part of a broad left-wing coalition that includes the Chilean Communist Party.

Borek, who if elected would become the country’s youngest president in more than two centuries, described the so-called Chilean miracle as “only for the outside world, not ours”.

Gabriel Borek cast his vote on Sunday. He is running as part of a broad left-wing coalition that includes the Chilean Communist Party © JOSE MIGUEL CARDENAS / EPA-EFE / Shutterstock

After the first round on Sunday, the risks of an “interventionist left government” have diminished, Nikhil Sanghani, Latin America economist at Capital Economics, told the Financial Times.

Congress is now divided with no majority guaranteed by either side that could act as a moderating force. The market’s first reaction was certainly positive. “It’s not so much the presidential side as it is the Congress,” said Marie-Therese Barton, head of emerging debt at Pictet Asset Management. She said the results would force Borek to moderate his policies so that his coalition could control part of the center.

It’s a stark shift in voter sentiment since May, when millions of Chileans voted overwhelmingly for leftist independents during the Constituent Assembly elections. This body is tasked with rewriting the current deeply divisive constitution, which was adopted in 1980 in the middle of General Augusto Pinochet’s regime.

Cast has spoken out against rewriting the country’s dictatorship-era constitution, which is due for a vote early next year.

The constitution favors private companies, which proponents say has propelled the country’s robust growth and lifted millions out of poverty. But for many it represents a direct link to the dictatorship, despite the many modifications.

Both houses of parliament will need to approve a new draft of the current constitution, which will be put to a public referendum in the third quarter of next year.

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