Results from Chile’s May 2021 elections

Chileans voted on 15-16 May to choose regional governors, local authorities, and, more importantly, the 155 members of the constituent convention, the body in charge of drafting a new constitution, following a referendum in October 2020. The ruling center-right coalition Let's Go for Chile (Vamos por Chile) and its allies will have 37 seats; the center-left's Approval List (Lista del Apruebo) will have 25; and the left-wing Approve Dignity (Apruebo Dignidad), which gathers the Broad Front (Frente Amplio: FA) coalition and the Communist Party, will have 28. Independent candidates will have a significant share, with at least 35, while 17 seats are reserved for indigenous groups.

The fragmentation and the high number of independent members of the convention will require agreements, with delays likely.

Each norm of the new constitution must be approved by two-thirds of the votes. Since no coalition received that share, they will have to seek agreements, which is likely to lead to a more consensual document, but will risk delays to the proposed timeline as the convention will have a maximum of 12 months (9 months renewable for another 3) to come up with the final draft. Then the document will be put forward for another referendum and, if accepted, would then go to Congress for approval.

The state will have an increased role in economic activity and the provision of basic services.

There is a wide consensus that a new constitution will increase the role of the state, mainly when it comes to guaranteeing basic rights (such as education, healthcare, and pensions) and the provision of basic services (including electricity and water). Constituent members are also likely to discuss limiting ownership by state-owned foreign companies in those services. A proposal to eliminate the autonomy of the central bank will very likely lack sufficient support. Changing the existing constitution, which enshrines property rights and allows private investment in almost all economic sectors, is likely to delay investment decisions. The significant number of independent constituent members, who share diverse views - and often unknown to the public, will raise uncertainty.

Private-sector investment is likely to continue to be allowed in copper mining and new energy technologies, with water rights likely to be reviewed.

Major state interventionism remains unlikely as this would not be supported by the center-right and the moderate center-left parties, amounting to 62 seats. No party or group has openly proposed either nationalizing or privatizing copper mining, Chile's largest sector, and convention members are likely to support the continued role of private companies operating alongside state-owned mining firm CODELCO, although with a likely increase in taxation. Despite calls from the FA to nationalize lithium, it is likely to maintain its status as a "strategic mineral", meaning that any private-sector involvement needs to be carried out through a contract with the state. Changes are likely to be proposed regarding mining property, by which the holder currently maintains a concession as long as an annual fee is paid, regardless of whether the holder has developed the resources. Private investment in renewable energy and green hydrogen is likely to continue as any government will seek to reduce the country's dependence on imports. Left-wing parties are likely to push for a greater role for state-owned companies in these fields, such as energy firm ENAP and CODELCO, and reduce subsidies, but are unlikely to prevent the involvement of foreign technical expertise. Property rights are likely to be widely maintained in some form, with the support of Let's Go for Chile and Approval List. An exception would be water rights, which are private and permanent. Water is likely to be declared a public good and, as such, to be prioritized for sanitation and human consumption over economic activities.

The new constitution is very likely to include reduced powers for the presidency.

There is consensus among the main parties on the need to reduce the power of the presidency, which currently has powers of veto and decree, and the exclusive faculty to rule on tax matters. With those powers removed, the executive would be unable to challenge at the Constitutional Court (Tribunal Constitucional: TC) any opposition-sponsored tax increases, as is currently the case. Suggested changes are also likely to include establishing the position of a prime minister, or equivalent, chosen by or with the support of Congress. The role of the TC is highly likely to be amended, reducing its capacity to block policy that already has legislative approval. Initiatives such as installing a parliamentarian system or a federal state are highly unlikely to succeed, although increased autonomy for the regions is likely to win support. Labour rights are also likely to be considered for explicit inclusion in the draft, with some groups demanding collective bargaining rights by sector, which is not allowed under the current constitution.

Constitutional recognition of indigenous populations is almost certain because of cross-party consensus.

With 17 representatives of indigenous groups taking part in the convention, policies such as effective enforcement of indigenous consultation prior to the development of any project are likely to be included. These would increase the likelihood of delays, particularly for mining, energy, and construction, but would strengthen the social license to operate, reducing the risk of cases being challenged at courts afterward. Such recognition, however, is unlikely to be sufficient to reduce violence by Mapuche groups in southern Chile over land restitution, as they are unlikely to be granted territorial autonomy.

Enhanced protection of the environment is likely to increase scrutiny over projects. There is consensus that the Constitution must recognize the need to protect the environment. This will raise environmental standards when undertaking major projects, particularly in mining, energy, and construction, potentially increasing bureaucratic steps and regulatory scrutiny.

Posted 21 May 2021 by Carla Selman, Principal Research Analyst, Country Risk, IHS Markit