The benchmark stock exchange closed down 9.3%, the biggest drop since the pandemic began in March last year, while the peso fell 2.3%.

After the ruling coalition suffered unexpected delays in a Constituent Assembly election, Chile’s assets plummeted, leaving the writing of the new charter firmly in the hands of the left.

The benchmark stock exchange closed down 9.3%, the biggest drop since the pandemic began in March last year, while the peso fell 2.3%. The yield on Chilean peso bonds due 2030 jumped 22 basis points to 3.82%.

According to data consulting firm Unholster, candidates for the ruling coalition occupied only 37 of the 155 seats in the assembly aimed at writing a new constitution. Competitors not affiliated with any political party won 65 seats. The result means that the ruling coalition has failed to reach the one-third threshold that prevents the market’s unfavorable provisions in the new charter.

Chileans from the left-wing party celebrate their victory in the elections held in Santiago this weekend.

Guido Chamorro, portfolio manager of Pictet Asset Management Ltd. in London, said: “This weekend’s constitutional parliament election reminds us that in the post-pandemic era, leftist candidates who are unfriendly to the market can do well.”

The result reflects the increasing rejection of traditional parties, which adds to uncertainty as one of the richest countries in Latin America re-enacted laws after the worst social unrest in a generation. The rules at stake have helped fuel more than three decades of growth, while at the same time exacerbating social dissatisfaction and inequality.

The focus of the debate during the rewrite is expected to include natural resources, pensions and social services. More directly, this result may increase the momentum of copper royalties. The bill will be passed by the Senate in the next few weeks, which will become one of the heaviest tax burdens of the global mining industry.

Sergio Lehmann, chief economist at Banco de Credito e Inversiones, said: “The election results have made this year’s growth biased downward.” “The economic impact in 2022 and 2023 will be even greater. Great uncertainty. A polarized constitutional process will hurt investment.”

Radical left

According to data from the election office Servel, approximately 6.4 million people participated in the election, accounting for 43%. This number is lower than the government’s forecast of 7 million votes.

Leftists and little-known candidates also brought a series of surprises in local elections. The conservative mayor of downtown Santiago lost to a communist candidate, while Karina Oliva of the Amplio League of the ultra-left front voted for the governor of the Santiago Metropolitan Region.

Cristobal Huneeus, director of data science at Unholster in San Diego, said that the parliamentary candidates from the left-wing organization Lista Del Pueblo or “People’s List” were the big winners in the weekend voting.

He said: “The most important issues they support are human rights, civil society, the environment, and the current notion that the economy is not good for the people.”

In the future, the election results are expected to improve the presidential candidacy of left-wing contenders including Gabriel Boric and Santiago Recoleta Mayor Daniel Jadue. Chileans will vote for the next head of state in November.

Clear signal

Last year, an overwhelming majority of citizens decided to cancel the current constitution that was implemented during the dictatorship of Augusto Pinochet. This is the main request of the protesters, who started taking to the streets in October 2019, initially through the subway to increase fares, and then expanded the request to include better public services.

The election was originally scheduled to be held in April, but as the number of daily Covid-19 infections and hospitalizations reached an all-time high, legislators voted to postpone the election to May. The Constituent Assembly will now have up to one year to draft a new constitution.

Fitch Ratings issued an e-mail statement stating that Chile will be able to withstand significant political and economic uncertainty after the rating downgrade in October 2020. The statement stated that the country’s current A- rating is “very reliable”.

Candidates supported by the government are not the only ones being hit. The middle class and center-left parties, such as the Socialist Party and the Christian Democrat Party, only won 14% of the votes in the parliament.

Jennifer Prible, an associate professor of political science at the University of Richmond, said: “The clearest signal so far is that the country’s rights are weaker than expected and the center has disappeared.”