Chile Election Puts Free Market Model at Mercy of Angry Voters

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Bloomberg Quicktake: Now published this video item, entitled “Chile Election Puts Free Market Model at Mercy of Angry Voters” – below is their description.

A politically polarized Chile holds presidential elections today, with voters set to either overthrow an economic model installed during the dictatorship of Augusto Pinochet or double down on its free-market ethos.

A politically polarized Chile holds presidential elections on Sunday, with voters set to either overthrow an economic model installed during the dictatorship of Augusto Pinochet or double down on its free-market ethos.

The vote is shaping up to be a battle between two candidates from opposite ends of the political spectrum — conservative Jose Antonio Kast and leftist Gabriel Boric. While Kast wants to slash taxes and government spending, Boric envisions a bigger state to tackle inequality while raising levies on corporations.

“Never before in elections have we seen such opposing economic views on how to address Chile’s challenges,” said Sergio Lehmann, chief economist at Banco de Credito e Inversiones in Santiago. “Compared to other elections, the search for consensus and agreements is relatively absent. Therefore, there’s more tension and more uncertainty.”

If no candidate receives more than 50% of the vote, a runoff will be held Dec. 19. Chileans will also elect new deputies for the 155-member lower house and about half of the senate. The outcome will be closely watched in the region ahead of major elections in Brazil and Colombia next year.

Investors are also on alert as one of Latin America’s richest nations weathers unprecedented uncertainty and higher social demands. Chile is also in the process of rewriting its constitution drawn up under Pinochet that has underpinned three decades of growth but fueled inequality.

Financial markets have swung wildly in recent months as Chile debates the future of an economic model drawn up in the 1970s and 1980s by the so-called Chicago Boys, disciples of University of Chicago professor Milton Friedman who advocated for open market policies including deregulation and privatization.

Chilean stocks plunged earlier this year on the outcome of a vote to select members of the constituent assembly only to surge a few months later after a leading presidential hopeful from the Communist Party was ousted in a primary.

The peso has dropped 3.1% this week alone, and is down 13.9% this year, trailing only Turkey and Argentina for the worst currency in emerging markets.

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