Chile’s new constitution, scheduled to be put to vote in September this year, looks set to upend the country’s free-market economy, undermining the legal safeguards enjoyed by private companies for decades.
The biggest victim of the new charter could be the country’s biggest revenue-earner: the mining industry.
The newly drafted constitution promises extensive rights to indigenous groups, potentially providing them with the power to block mining operations in their area.
According to local media reports, the indigenous groups will be strengthened so much that they will be allowed to put in place their own judicial systems.
Chile exported US$37 billion worth of minerals in 2020, with the sector accounting for nearly 13% of the country’s GDP.
Chile is also unveiling a public pension fund, which analysts say may turn out to be a drag on the government’s finances, tempting international rating agencies to downgrade the country’s sovereign debt bonds.
In addition, reports suggest that the new constitution might even weaken the central bank governor, giving Congress the power to fire him. With more than 10% inflation, Chile is already in an economic recession.
The country’s newly elected leftist president, Gabriel Boric Font, favors the new constitution, but a large majority of Chileans are less likely to support the charter, according to local publications citing data from pollster Cadem.
The legal uncertainty has already begun to affect Chile’s investment climate. Freeport McMoran Inc., a US-based mining company, has put investments on hold, according to the Wall Street Journal.