Chilean peso rallies after right-wing victory in constitution vote

The peso was trading up 0.66% to 788.50/788.80 per dollar in light of the results, although doubts remained over whether dialogue between all parties would be achieved for a new draft to garner enough popular support. The constitutional advisers elected on Sunday will start drawing up a new constitution in June, with voters approving or rejecting it in December.

Chile's peso currency strengthened against the dollar on Monday morning, after right-wing parties won a majority of seats in a new council that will lead a redraft of the Andean country's dictatorship-era constitution.

The Sunday ballot, in which right-wing parties won 33 of the 50 seats on the council, marked a sharp shift from a progressive majority that drafted a failed first constitutional rewrite, a move economists see benefiting local assets at least in the short term. The peso was trading up 0.66% to 788.50/788.80 per dollar in light of the results, although doubts remained over whether dialogue between all parties would be achieved for a new draft to garner enough popular support.

The constitutional advisers elected on Sunday will start drawing up a new constitution in June, with voters approving or rejecting it in December. "The positive evolution of local assets in the medium-term will depend on the ability of the Constitutional Council to draft a constitution that can be approved in the next electoral process," economists at Scotiabank said.

The first rewrite, drafted by largely independent and left-wing constituents and considered one of the world's most progressive constitutions, was rebuffed by voters in September. Andres Abadia, Pantheon Macroeconomics' chief Latin America economist, said the right-wing control of the council would lead to lower political risks, helping to keep financial metrics under control and supporting the local currency.

JPMorgan economists also said the results could be positive for investments "if well managed", although noting the recent pendulum behavior of Chilean voters was a warning signal in the sense of settling the debate and allowing uncertainty to ebb. "Our central scenario assumes the institutional design of the new constitution process is to help offer a minimalist new constitution so to gain enough popular support in December," they said.

"(But) political strategies ahead could offer surprises."