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Uncertainty to linger on.
2023/12/18 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

Another rejection. After four years of constitutional uncertainty, the second constitutional proposal was also rejected in a national plebiscite by a wide margin, this time by 55.8% vs 44.2%, with 99.78% of the votes tallied, leaving the current constitution in place for now. Participation was high at 84.4%, yet slightly below the 85.86% of the previous constitutional plebiscite that took place in September 2022. 


No surprises. The result was essentially in line with local surveys. Surveys prior to the two-week blackout period consistently showed the rejection option ahead of the approval, yet by a narrowing margin.   


Uncertainty to linger on. The second rejection reflects the important challenges the country is experiencing to reach agreements on fundamental issues, also evident in the inability of the political system to agree on a pension reform for several administrations. The difficulties in reaching consensus have been flagged by rating agencies, even in S&Ps negative rating outlook in October 2023. Although market participants are likely to have had a rejection as their base scenario, the likelihood of future calls for a new process or relevant constitutional modifications will maintain economic policy uncertainty above pre-social crisis levels, especially affecting large scale investment projects. Economic policy uncertainty could fall if the administration and Congress reach a consensus on the structural reform agenda, which seems challenging considering the administration’s minority representation in both chambers of Congress.