Los Chilean markets They jumped on Monday after the overwhelming defeat of a controversial proposal for a new constitution in the world’s largest copper producer, which had been questioned for its eventual economic impact.
On Sunday, Chileans rejected the controversial proposal with 61.9% in a plebiscite, although they left the door open to a new process to replace the Magna Carta inherited from the dictatorship.
The Chilean peso it advanced half-day to 850.20 buying units and 850.50 selling units, despite the limitation of operations in the market due to a holiday in the United States.
Meanwhile, the local stock market rose more than 6% in the first deals with strong rises in the airline LATAM, the retailer Cencosud and the iron mining company CAP.
JP Morgan bank said the election result should have a positive impact on markets due to less uncertainty and lower risk premiums ahead with expectations that the result could temper its plans.
“A more gradual and moderate reform push would help mitigate the dimension of uncertainty associated with the government’s economic and financial agenda,” the bank said.
According to experts, the referendum also turned into an assessment of the government, which is struggling against soaring inflation, economic slowdown and an internal security crisis.
“The results represent a major blow to President Gabriel Boric, with key tax and pension reforms likely to be watered down and delayed,” Eurasia Group said in a note.
However, he added that some changes are likely to ultimately secure approval given the broad consensus on the need for more income, coupled with long-standing discontent with the pension system.
After acknowledging defeat, President Gabriel Boric also promised to adjust his government team and called all the political forces to a meeting to advance the constitutional process.
“We think some of the risk premium built in over the past two years should be discarded after last night’s results as local sentiment should improve in the near term,” Citi said in a note.
Still this week it is expected that the Banco Central raise the benchmark interest rate again in the face of persistent inflationary pressures. In addition, the agency will present the adjustment of its macroeconomic projections for this and next year.
After learning the results of the referendum, the mining industry of the world’s largest copper producer – one of the biggest opponents of the text – called for a “new pact” favoring the unity of the country.
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