Citizens of Chile are scheduled to vote Oct. 25 on a referendum that may clear the way for a re-write of the country’s constitution, a key demand stemming from a period of civil unrest in late 2019. Polls show support for a new constitution at about 70%, though the issue is provoking acrimonious debate. For those on the left, overhauling the charter drawn up during the 1973-1990 military dictatorship is the only way to hold together a nation riven by months of violent protests and secure improvements in social justice. For those on the right, change imperils the model that delivered more than 30 years of rapid economic growth, turning Chile from a backwater into one of Latin America’s wealthiest nations per capita.
1. What are the arguments for a new constitution?
To start with, many say the constitution, though amended several times since Chile returned to democracy, is illegitimate because of its origins during the reign of right-wing General Augusto Pinochet, whose rule featured arbitrary arrests, torture, disappearances and political executions. Beyond that, critics argue that elements of it contribute to the income inequality and weak social net that have fed mass protests. Some object to the high importance the document assigns to property rights and to the dominant role it gives the private sector in providing services such as education, health care and pensions. They dislike its requirements for large congressional majorities to change major laws, a rule that effectively grants a veto to smaller parties on the right that oppose structural reforms to the economic and social system.
2. What are the arguments against changing it?
Many on the right say that the current constitution, with its pro-business emphasis and prioritization of property rights, has been key to Chile’s economic growth and stability. Chile has Latin America’s best-rated credit, and its economy has been one of the fastest-growing in the region for years, according to the World Bank. Conservatives are especially concerned that many Chileans want to re-write the constitution from scratch. Some on the right argue that conditions aren’t ideal for a constitutional debate given the coronavirus pandemic as well as the risk of fresh violence in the streets.
3. What’s behind the turmoil?
The protests began Oct. 18, triggered by an increase in the subway fare. Demonstrators quickly expanded their complaints to include low pensions and deficiencies in the health care and education systems. The unrest, which lasted through the start of this year, forced shops to close, disrupted key transportation links and stalled investment decisions.
4. What’s the process for writing a new charter?
Originally scheduled for last April, the referendum was delayed because of the coronavirus. In the vote, citizens will decide not only whether a new constitution will be drafted, but how. They can choose between a newly elected assembly, or a commission split between new delegates and existing members of congress. In either case, representatives will be chosen in April on the same day as municipal elections. The commission would then have one year to draft the new charter, with each article requiring the approval of a two-thirds majority. A final draft would then have to be ratified in another referendum in the first half of 2022.
5. How has the debate affected the market?
When President Sebastian Pinera said Nov. 11 that he was willing to change the constitution, the currency, which had held remarkably firm in the early days of the protests, went into free-fall, depreciating by more than 13% before the central bank intervened. More recently, some investors have said the looming referendum has kept the peso weaker than it should be given recent gains in copper, which is Chile’s biggest export, and the country’s balance of trade. Some opponents of the rewrite argue that the length of the process will harm the economy because investors will hold back in the absence of certainty about future investment conditions. Changes to the constitution may unsettle financial markets if they entail more public spending.
6. What do Chileans want in a new constitution?
In a public opinion survey in late August, 93% of respondents said they wanted health care and education rights guaranteed by law; 72% said political power should be divided more evenly between the president and congress. Power, including control of the budget, is currently concentrated in the office of the head of state. Only about half said the central bank, which has operated autonomously for over 30 years, should continue to have an independent policy making process and governance. At the same time, 85% said that the right to property should be considered fundamental, up from 74% in a January poll.
For more articles like this, please visit us at bloomberg.com
©2020 Bloomberg L.P.