Gabriel Boric wins presidency in a landslide

Gabriel Boric of the left-wing Apruebo Dignidad (AD) coalition won the second-round run-off presidential election on December 19th, defeating José Antonio Kast of the far-right Frente Social Cristiano (FSC). Mr Boric’s large margin of victory bodes well for governability in the short run, but a cloudy economic outlook, polarised politics and high expectations pose risks for the new president over the medium term.

Mr Boric received 55.9% of the vote, compared with 44.1% for Mr Kast. Mr Boric’s policies clearly better reflect the median voter’s desire for the state to play a greater role in the economy, including in the provision of social services such as pensions and healthcare. This contrasted starkly with Mr Kast’s pro-market agenda, which sought to maintain the core elements of Chile’s orthodox economic model (Mr Kast’s far-right social policies will also have put centrist voters off).

Mr Boric’s victory also hinged on his ability to shift to the centre after the first round by moderating aspects of his economic policy proposals. For example, he emphasised more gradual changes than his original programme had proposed, such as seeking to increase tax collection to 5% of GDP instead of 8% over four years. Mr Boric also made amends with centre-left parties that the AD had criticised in the past and reassured voters that he would seek dialogue with the opposition in order to pass reforms.

The scale of Mr Boric’s victory is not unprecedented; a former president, Michelle Bachelet, and the current president, Sebastián Piñera, won by similar or greater margins in their respective run-off elections in 2013 and 2017. In both cases, however, their approval ratings were underwater less than a year after taking office. Mr Boric is likely to face a similar (or worse) fate. Amid an ongoing process to rewrite the constitution, and with an evenly split legislature, politics will remain highly polarised and passing ambitious reforms will be difficult without significant dilution. Mr Boric also faces a slowing economy, along with high inflation and rising interest rates, and is likely to seek to increase spending, which would delay fiscal consolidation and raise Chile’s debt burden.

We had expected Mr Boric to win the presidency, but we had not taken the step of incorporating his more statist policies into our economic forecasts. We will now make these revisions, to reflect higher spending and weaker private investment, at least in the short term.

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