Chilean Political Stability: A 6-Month Outlook

Since 2019, Chileans periodically take to the streets and protest against a myriad of government policies. Chileans recently elected Gabriel Boric by a slim majority but rejected his proposed constitutional amendments in a referendum in September. In the meanwhile, Chile’s economy is navigating a difficult road to recovery from the pandemic, further layering discontent in the country.

KJ-1: There is a realistic probability that the Chilean government will enact constitutional reforms in the next 6 months.

• President Boric proposed a constitutional referendum to solve the country’s rampant political polarization and social discontent [source].  

• Lack of political experience and technical background among members of the Constituent Assembly contributed to an unpopular draft constitution [source].

• Opposition lawmakers support a new draft and President Boric held several meetings in an effort to jumpstart the process [source].

• Boric reorganized his cabinet after losing the vote in order to widen the scope of coalition participation [source].

• Support for a new constitution ranks high among Chilean voters who dislike the current Pinochet era document [source].

• The UN Human Rights Regional Office for South America is assisting the government in drafting the new document [source].

• As part of the UNHRROSA’s assistance program, the UN hosts seminars and public hearings designed to facilitate greater stakeholder participation in the process [source]. 

KJ-2: It is likely that the Chilean economy will perform poorly in the next 6 months.

• Thus far, foreign direct investment in Chile has exceeded the 5-year average, however, the inward flow was down by 14% in the first half of the year [source]. 

• Overall, it appears FDI is decreasing in the second half of 2022 [source]. 

• The slowdown of FDI is linked to uncertainty surrounding the constitutional process [source]. 

• The Chilean Central Bank forecasts an overall decrease in FDI of 3.3% in 2022 and 4.7% in 2023 [source]. 

• The Chilean economy will grow slightly by the end of 2022 but is expected to contract by at most 1.5% in 2023 [source]. 

• The government is attempting to mitigate the bleak situation with tax breaks for foreign businesses, particularly those involved in mining [source]. 

• The price of industrial metals fell by 17%. Copper fell by  6% to $7,560 a tonne [source]. Chile is the world’s leading copper producer, averaging over 28% of global production [source]. 

• The drop in the price of industrial metals coincided with a slowdown in manufacturing growth in China and persistently high global energy prices [source].

• China registered lower GDP growth than the rest of Asia for the first time since 1990, impacting reliant economies such as Chile [source].

KJ-3: It is likely that Chile will continue to experience widespread protests in the next 6 months.

• The Piñera government cracked down on protesters in 2019, leading to widespread abuse by the security forces [source]. 

• Chilean police fired rubber bullets into crowds, resulting in eye injuries. Eye bandages became a symbol of the protest movement [source].

• The unrest in Chile resulted in the largest recorded instance of ocular trauma cases anywhere in the world [source]. 

• Following the loss of the constitutional vote, students took to the streets and shut down several metro stations [source]. 

• The students also demanded wide-reaching social reforms to address the rising levels of inequality in Chile as well as educational reforms [source]. 

• The new constitution was meant to address land and water rights for Chilean citizens and to address the widespread abuse of Chile’s water supplies by agricultural firms [source]. 

• The need for comprehensive environmental reforms became apparent as the two main rivers of the Petorca region dried up [source]. 

• Lake Aculeo completely dried up in 2018 as a result of siphoning for water-intensive agricultural projects [source]. 

• The situation has become so desperate that emergency water tankers deliver water supplies to communities across the country [source].

• The run-up to the referendum was fraught with misinformation, such as the claim that the new constitution would ban bottled water, highlighting the central role water plays in the decision-making process for many in Chile [source]. 

Intelligence Cut-Off Date 29 September