Chile’s Presidential Elections: We’re Paying Attention

On December 16, Chile will hold the second round of its presidential elections. Facing off will be José Antonio Kast, who obtained 27.91% of the first round vote, and Gabriel Boric, who came in second with 25.83%. Kast is commonly described as “far-right,” with “leftist” the preferred adjective for Boric.

For Latin America watchers, these elections are a big deal. They are Chile’s first presidential elections after an eventful couple of years, marked by massive protests and the drafting of a new constitution. The elections will help shed more light on public sentiment in a polarized country.

But there are a couple more practical reasons for keeping tabs on these elections.

1. Chile’s Economy Is Hot

Chile was the fastest-growing economy among the members of the Organization for Economic Cooperation and Development (OECD) in Q3 2021, posting GDP growth in that period of 17.2%. Of course, this figure partly reflects the low base set in 2020 amidst the pandemic, but it’s not as though COVID-19 left other countries unscathed.

According to the OECD, Chile’s economy has been spurred by “a rapid vaccine rollout, a large fiscal stimulus, high commodity prices and the short-term impact of extraordinary pension fund withdrawals on consumption.”

But Chile’s new leader will have his work cut out on the economic front, with growth projected to slow down “as monetary and fiscal policies tighten.” The ongoing elections are giving Chileans an opportunity to indicate which course they’d like to set to navigate economic challenges – with two very different choices in front of them.

Boric, a former student leader whose coalition includes the Chilean Communist Party, seeks “the overhaul of a free-market model that has enabled economic growth at the cost of deeply entrenched inequalities.” “If Chile was the birthplace of neoliberalism,” Boric promises, “it will also be its grave.” A Boric government would “hike taxes on major industries, ramp up public spending to overhaul services, and scrap the private pension system that has underpinned Chile’s capital markets.”

For his part, Kast defends the free-market model that Boric seeks to put away. “By reducing corporate and sales taxes, cutting red tape and reducing legal uncertainties for investors,” Kast “aims to return the economy to the halcyon days of the 1990s when expansion averaged 6.1% a year.” Foreign investors “must go back to seeing Chile as a responsible country with a promising future,” Kast urges.

Whatever the merits of the candidate’s proposals, a Boric presidency would be likely to give investors pause when it comes to Chile. It is true that, once in government, some leaders turn out to be more moderate than their campaign-trail versions. But given some of the cautionary tales around the continent, expect few to give 35-year-old Boric the benefit of the doubt.

By contrast, a Kast victory would signal a doubling down on the Chilean model that may prove reassuring to business. At the same time, the prospect of neoliberal revindication may rekindle the fires of unrest.

2. Cannabis Legalization Is on the Agenda

Back in 2015, Boric tweeted, “I have smoked weed and still do so occasionally,” though by the time he ran for president he said he no longer smoked. In any case, Boric’s platform opens the door to adult-use legalization, based on a “review of all international experience.”

Legalization would be “accompanied by a regulatory framework and public policies that, among other things, strengthen rehabilitation and mental health programs and reduce current drug use within the population, especially amongst teenagers.” Boric also supports legal home cultivation, to save cannabis users from the narcos’ clutches and prevent their exposure to hard drugs.

For his part, Kast supports the medical use of cannabis, though not its recreational use. According to Kast, “given the alcoholism that exists today in Chile at the youth level and the sale of tobacco to minors, it will not be possible, based on those precedents, to regulate the consumption of marijuana to minors.”

Interestingly, cannabis is one issue on which the gulf between Boric and Kast is not as wide. In a region where cannabis often faces strong opposition from both the left and right, it is interesting – and encouraging – to see a matchup in which the more restrictive view is “only medical,” as opposed to an iteration of reefer madness.

This said, the prospect of legal adult-use cannabis in Chile is thrilling. For one, it would mean the opening of an exciting market of almost 20 million people to the legal cannabis industry (and, yes, not all of those 20 million would be able to legally acquire cannabis). Legalization in Chile would also be a major turning point for cannabis at a regional level; this is after all one of Latam’s leading economies. More broadly, it would be a momentous event for a country that as recently as 1990 was ruled by a military dictatorship.

We don’t have a horse in this race, but we’re still on the edge of our seats.

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Latin America