Wed | Sep 23, 2020

Chile stocks, peso jump after conservative wins presidency

Published:Friday | December 22, 2017 | 12:00 AM
Former President Sebastian Pinera, with his wife Cecilia Morel, stands before supporters as he celebrates winning the presidential elections runoff in Santiago, Chile on Sunday, December 17.


Investors gave a warm welcome last week to the easy victory by former President Sebastian Pinera in a presidential runoff election that is swinging Chile back to the right.

Chile's IPSA stock index soared and the peso strengthened on the December18 triumph by the market-favourite candidate, a billionaire who ran on a platform of boosting sluggish economic growth in the world's leading copper producer.

"The market reaction has been very favourable and reflects this commitment to make Chile regain its leadership," Pinera told foreign correspondents during a meeting.

During his first term as president, Pinera struggled with large protests over Chile's inequality and demands for education reform and left office with low popularity ratings. But he also oversaw annual economic growth of about 5 percent a year.

The 68-year-old president-elect now proposes to slash taxes on business to revive growth and vows to launch a $14 billion, four-year spending plan that includes fresh investments in infrastructure. Since he lacks majority support in Congress, analysts predicted Monday that he will be able to implement only moderate market-friendly reforms and will struggle to reverse policies launched under current left-of-center President Michelle Bachelet.

With nearly all ballots counted, Pinera won 54.6 per cent of the votes to 45.4 per cent for former journalist and centre-left Senator Alejandro Guillier, who was supported by Bachelet. Analysts had expected a much closer contest.

Pinera compared Guillier during the campaign to Nicolas Maduro, the socialist president of crisis-torn Venezuela, where people are struggling with triple-digit inflation, shortages of food and medicine and high crime.

During his meeting with reporters last week Monday, Pinera said Chile hopes Venezuela's government and opposition can soon strike "a good deal that will restore liberties, democracy, the rule of law, and the respect for human rights."

Guillier, 64, had vowed to continue Bachelet's plan to increase corporate taxes to partly finance an education overhaul, reform the constitution and improve the pension and health care system.

But many Chileans have been disillusioned by lagging economic growth during Bachelet's administration, a problem based largely on lower international prices for copper, which is the backbone of Chile's economy. And Pinera's triumph underscored the fractures in her New Majority left-wing coalition.

Pinera won in last month's first round of the election, although he fell far short of what polls had projected. Then on Sunday he outperformed analysts' expectations.

"Pinera managed to gather a big majority of the votes from center-left candidates" who were in the opening round, said Javier Sajuria, a lecturer in politics at Queen Mary University of London.