Chilean assets plunged after the ruling coalition suffered a crushing electoral defeat that left the writing of a new constitution largely in the hands of the left-wing.
The benchmark stock exchange tumbled 7%, while the peso cratered as much as 2.9% to 720 per dollar, on track for the biggest decline since November 2019 when a series of protests wracked the country. Chile’s dollar bonds due in 2031 dropped to a two-month low.
Candidates from the ruling coalition obtained just 37 of 155 seats on the assembly designed to write a new constitution, according to data consultancy firm Unholster, far less than expected. Contenders unaffiliated with any political parties secured 65 seats. The result deprived the right of the one-third threshold they needed to reach to veto clauses in the new charter.
Chileans Elect Members of Convention To Rewrite Pinochet-era Constitution
Supporters for left-wing parties celebrate in Santiago on May 16.Photographer: Marcelo Hernandez/Getty Images
“Chile has been one of the best performing markets this year. The party, though, may be over,” said Guido Chamorro, a portfolio manager at Pictet Asset Management Limited in London. “The constitutional assembly elections this weekend remind us that market-unfriendly, leftist candidates can do very well in the post-pandemic era.”
The results reflect growing rejection of traditional parties, adding to uncertainty as one of Latin America’s richest nations rewrites its laws following the worst social unrest in a generation. At stake are the rules that helped drive more than three decades of growth, while simultaneously fueling social discontent and inequalities.