Leftist Millennial Elected President in Chile After Running on Higher Taxes, a Green Economy and Greater Equality

After a campaign focused on discontent with an investment-friendly economy, Gabriel Boric (leftist) was elected Chile’s president on Sunday.

The former student protest leader won 56% of the vote, beating conservative rival Jose Antonio Kast’s 44%. This victory will likely shock markets, which fear interventionist policy. Boric (35 years old) will be the first president of Croatia and has an ambitious agenda.

His win in a runoff paves the way not only for a generational shift but also for the biggest economic changes in decades for one of Latin America’s richest countries, a global financial market favorite. The campaign was highly divided and only moderated at the end when both candidates tried to win centrists. There will be many challenges for him, including the division of Congress, sharp economic slowdown, and the creation of a new Constitution.
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“We cannot continue to allow the poor to pay for the inequalities of Chile,” Boric told thousands of cheering supporters in a fiery victory speech which also acknowledged all he needs to do to build alliances. “We will reach out and build bridges so our citizens can live a better life.”

He repeated something he told President Sebastian Pinera in a conversation between them broadcast after results were announced: “The agreements need to be among all Chileans and not made behind closed doors.”

To begin the transition, they will meet on Monday. Kast accepted the offer quickly and spoke to Boric Monday evening.

Streets were packed with cars honking and banner-waving citizens across 19 million people in the United States. Nearly 10 percentage point higher than last month’s first round, 56% of registered voters participated in this round.

But Boric’s early focus on outreach has an undeniable logic. He must form a partnership with both centrists as well as hard leftists to achieve radical changes. This is because they have had decades of conflict.

“He will face a divided parliament, so passage of legislation will be difficult and will require strong negotiating skills and pragmatism,” noted Jennifer Pribble, professor of political science at the University of Richmond.

Boric calls himself a moderate socialist, who rejects Venezuela and Cuba’s hard left model. Still, Kast and his supporters warned of Boric’s alliance with the communist party as a risk.

“This is the worst scenario that the markets could have envisioned,” said Klaus Kaempfe, portfolio solutions director at Credicorp Capital in Santiago. “They were waiting for a much tighter vote showing a desire for dialogue.”

Credicorp stated in a research note that the peso may fall 4% to 875-885 dollars per dollar on Monday, while stocks could drop 10%.

Pinochet Throwback

Boric’s supporters saw Kast as a dangerous throwback to the right-wing dictatorship of General Augusto Pinochet due to an emphasis on public order and conservative social mores.

Boric is an unmarried, tattooed, and bearded man who first rose to prominence in a decade when he organized nationwide protests for high-quality, free education. In 2013, he ran unsuccessfully for deputy to the lower house and was reelected with a huge majority.

His focus on social justice was in line with unrest over transit fare increases in 2019. This led to a rapid expansion of a wider movement calling for improved health care and public transportation. During the campaign, Boric often vowed that, “if Chile was the birthplace of neo-liberalism, it will also be its grave.”

Boric wants to dismantle some pillars of Chile’s economy such as its private pension funds, which form the bedrock of the local capital markets. He backs higher taxes on both the rich and the nation’s crucial mining industry — Chile is the world’s biggest copper producer — while also promising to keep government debt in-check.

In March, Boric will take the helm of a nation that’s facing unprecedented political upheaval. A process for drafting a new constitution began after social unrest. It is currently being done by a left-leaning group. The result will be submitted to a national referendum, in 2022.

He’ll have to contend with economic growth that will come to a halt, slowing from a record high near 12% this year to a rate closer to 2%, according to the central bank. To curb inflation, policy makers have been raising interest rates rapidly. However, Chile has relatively solid fiscal records, but the ratio of debt to GDP has increased fast due to pandemic spending.

Individuals and companies from Chile have been moving money to other countries at an unprecedented rate over the last few years. This has weighed on the currency.

Regionally, Chile’s election follows the triumph of Pedro Castillo in Peru earlier this year, and stands to add momentum to leftist candidates in Colombia and Brazil, which will hold presidential elections next year. Both of these countries, like Chile are now facing increasingly polarized policies.

“Chile’s president-elect could become the face of Latin America’s new left, inspiring other candidates in the region,” said Oliver Stuenkel, professor of international relations at Fundacao Getulio Vargas in Sao Paulo.

–With assistance from Sebastian Boyd and Eduardo Thomson.