Constitutional Process ECONOMY MIGRATION

How major investment banks weighed in on first draft of Constitution

The first draft of the new Constitution was released this past weekend. Major banks immediately weighed in, discussing the proposed changes and implications. Currently, polling suggests a majority of voters plan to reject the new Constitution, but the percentage of people in favor of it is slowly rising.

On May 14, months after Chile’s Constitution constituents started drafting and debating provisions for Chile’s new Constitution, the Convention Plenum and the seven thematic commissions released the first draft. Currently containing 499 articles, it may end up being one of the world’s longest. The weeks ahead will be used to fine tune this initial proposal, likely shortening it. With its current length, it exceeds the length of neighboring South American nations’, for example, Bolivia’s, which runs on to 411 articles. It even exceeds India’s legendary constitution in number of articles: India’s stands at 466.

Earlier this week, major investment firms J.P. Morgan and Morgan Stanley, both released their own assessments of the draft Constitution. Morgan Stanley said that it focuses on “higher levels of structural fiscal spending and closer regulatory scrutiny on corporations – especially on the environmental front, but without disruptive outcomes to the country’s macro framework.”

Both investment firms highlighted in their reports the minimal changes the new Constitution makes towards the operating framework of the Central Bank. The new draft permits the Central Bank to maintain its autonomy, but it calls to increase the number of board members to seven, from its current five. In addition, these members are to be appointed by the president, and Congress may request the dismissal of members through a majority vote. 

On the topic of political rights, the plenum rejected language that would have given full equality to political parties and political and independent organizations. As to social rights, Morgan Stanley stated that the “draft articles for the new Constitution set out a meaningful expansion of social rights.” The draft emphasizes the transition of the provision of healthcare, education, social security, and housing from the private sector to the State for the provision 

JP Morgan’s report shared the shift in polls over the support for the newly-drafted Constitution, noting that the weekly CADEM survey continued to show that the “no” vote still had a commanding lead with 46 percent of those polled, but it had lost 2 percent since the week before meanwhile, the percentage of those in favor of the new Constitution had climbed to 38 percent, a gain of 3 percent.

Morgan Stanley’s report underscored the obvious: if the new Constitution is rejected, it will lead to a “renewed risk of social unrest” within the country. However, with 16 percent of voters in the CADEM survey still reporting as “undecided,” the coming weeks leave the door open to either acceptance or rejection of the draft when the public finally votes on Sept. 4, 2022.

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