Strategy Note /

Chile presidential vote led by rightist candidates

  • Rightists beat Leftists by 53.5% to 46.5% in first round presidential election while Congress still lacks clear majority

  • As expected, Kast (right) will be the favourite in his run-off against Boric (left) on 19 December

  • Fears of worsening political risk are overdone and Chile is the cheapest hard commodity exporter in EM equities

Chile presidential vote led by rightist candidates
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
22 November 2021
Published by

In Chile, rightist candidates, in aggregate, lead those from the leftist camp by 53.5% to 46.5% in the first-round presidential election, conducted on 21 November (99% of votes counted).

This is in line with our expectations, as well as recent opinion polls.

The second round run-off is scheduled for 19 December between José Antonio Kast – who won 28% on his own and whose campaign centres on portraying his opponent as a radical leftist who will lead Chile down the path of Venezuela – and Gabriel Boric, who won 26% on his own and who repudiates communism but calls for a greater state in the pensions sector and social welfare support.

Whoever wins the presidential election will have to work with a newly elected Congress (all of the lower house and half of the upper house were also voted for in this general election) where there is no clear majority for either rightist or leftist camps. A fragmented Congress is not a new feature in Chile, just ask outgoing President Pinera.

Chile: majority support for rightist candidates in first round

Chile Congress lacks clear majorities in both houses

Chile is the cheapest hard commodity exporter in EM

Fears over the potential for a political shift to the left has been one factor behind the weak performance of Chile assets this year, with equities (IPSA index) down 10% ytd and the FX rate down 14%.

This is despite the 24% increase in the commodity price of Copper. Chile mines close to 30% of global copper and metals exports account for over 20% of Chile's GDP.

The recent improvement in rightist candidate Kast's opinion poll support has led to a 5% bounce in equities in the month of November.

Chile's trailing price/book and price/earnings are on 20% and 50% discounts to respective five-year medians, making it the cheapest hard commodity exporter in the emerging market equities.

Chile the cheapest commodity exporter in EM equities

Fear of Boric overdone

Fear of a Boric presidency are overdone in any event, because of the following mitigating factors:

  • It is likely that there is no clear congressional majority (a comfort for those who fear a shift to the left and a concern for those wishing for structural reform).

  • Boric is a pragmatic leftist not a communist (like the candidate Daniel Jadue that he beat in the nomination contest).

  • Chile retains legal safeguards for orthodox economic policy (fiscal responsibility law, central bank autonomy, inflation targeting).

  • A major factor in Chile's weak performance in 2021, independent of political risk, has been the withdrawal of funds from pensions in order to combat economic disruption from Covid – this has occurred under outgoing right-leaning president Pinera and, with a full vaccination rate of 83% and lockdowns largely lifted (the Covid government stringency measure from Oxford CGRT is merely 36, on a scale of 0 to 100), it appears that Covid disruption is waning.

Chile presidential candidates profiles: right versus left

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