New Constitution: A framework for action for the future in Chile

A demonstration against the proposed Constitution in Chile, last weekend in Santiago. Matias Basualdo (AP)

Uncertainty prevails in Chile. Also now, when the country is at the gates of choosing to approve or reject the proposal for a new Constitution. The uncertainty is also reflected in credit risk swaps, which began to rise after the social outbreak. Today, insuring the five-year debt against possible default is more expensive for Chile than for Peru. As Sebastian Boyd of Bloomberg explained, this has less to do with the expectation that Chile will not pay its debt, but rather with political uncertainty in the country, which adds to international uncertainty. Today “nobody knows what Chile is going to be like in five more years,” nor does anyone know “what it means if the Approval wins or if the Rejection wins.”

Chile has already spent three years of efforts to further unite its fragmented society. The massive social protests in October 2019 had the country within walking distance of a civil war, when the political parties managed to seal a transversal agreement for “peace and social justice”, opening the option of creating a new Constitution. This pact, and perhaps above all the draconian measures dictated by covid-19 in 2020, had finally put a cold shoulder to heated protests that in part were expressed in a very violent way.

The October 2020 plebiscite had finally brought good news: it had a high electoral turnout, and showed enormous cohesion in the result: almost 80% of voters declared themselves in favor of starting a constitutional process. Thus, in May 2021 the members of a Constituent Assembly were elected, which in July 2022 concluded its work with the delivery of a proposal for a new Constitution after 12 months of work. The drafted text has a more ecological and social character, and would introduce important changes in the political system. It is this proposal that must be approved – or rejected – this September 4.

There is still no adequate citizen support behind either of the two options. The result of the referendum is uncertain due to the high percentage of undecided voters. A survey by Ipsos and Espacio Público reveals that, if approved, 84% of people think that the text should be modified in the short term; and, if rejected, 86% believe that the current Constitution is not the solution either, and that it must still face reforms.

Part of the uncertainty is due to the fact that only after the plebiscite could the constitutional text be adjusted so that it has broad citizen support. Almost three years after the social outbreak, it would be necessary to add even more time to adjust the texts, and probably add at least another decade for the implementation of the new Constitution. The spirits are reflected in this passage of time: while in 2019 56% of the people surveyed believed that a new Constitution would help solve the country’s problems, in 2022 this percentage was reduced to only 36%, as shown by a survey by the Center for Public Studies. The data revealed by Ipsos and Espacio Público reflect that same vision: of an average of four people, almost three indicated that corruption, crime and unemployment would not improve with a new constitution. Nor the abuses of the private sector against consumers.

Post-social outbreak, multiple proposals had been made to better address corruption and economic concentration. However, there was no space to address these more tangible agendas. All the more reason they should be resumed now, parallel to the constitutional process.

In Chile, modernizing the State and airing an oligopolistic economy, not very transparent and highly concentrated, requires strategic agendas that go beyond the Constitution. And also beyond the typical micro-reforms that are proposed. The pending reforms are also added to the transformation that all countries will have to face at the moment: at the State level, they must adjust employment as a result of the Fourth Industrial Revolution; second, at the economic level, so that the markets are more dynamic and truly sustainable, beyond the greenwashing that is observed at the international level.

Faced with the necessary reforms in Chile, the plebiscite may evoke a scene from Wolfgang Herrndorf’s novel Goodbye Berlin: when the protagonist feels like a floating castaway who sees a cruise ship pass by, and someone throws a Red Bull can at him .

Reducing uncertainty and at the same time inducing the changes that Chile requires can only be achieved if, parallel to the constituent process, the political elite commits to a reform agenda, with a vision of 10 or 15 years, and measurable strategic objectives. In other words: we need to know where we are going, it is more important than knowing what we are doing. It would be interesting if this agenda is even set in organic laws -as an intermediate instrument between the Constitution and common laws- in order to reflect a true political commitment, according to the final results that are pursued for the country.

Whether or not the new Constitution is approved, Chile needs to be more ecological, more equal, less economically concentrated, and more innovative in its markets. It needs to get closer to the OECD and sustain greater economic growth, especially of medium-sized companies. For all these areas, metrics could be set, and clear objectives according to which the respective measures that would allow progress to be made year by year can then be discussed. In this way, the reforms would be given a framework that would further align interests and facilitate the transition, along with leading to a reduction in uncertainties and greater consistency in public policies.

Lastly, when carrying out transformation processes, it is good to remember Kurt Schumacher, former president of the German Social Democratic Party, when he warned in 1949 that the concept of the “Social Market Economy” -recently baptized after the second world war – would be nothing more than a “marketing balloon”. For the most part, he was right. Germany never set how to measure this concept, nor did the policy commit itself to major associated objectives.

As Chile now seeks to move towards a new model of economic and social development, it might be inspiring to also give it a suitable name, as Germany did in its time. It could be a Sustainable Market Economy. It would remove uncertainty and could motivate multiple national and international actors to once again believe more in Chile’s future, especially when this concept is accompanied by measurable metrics and a written and tangible commitment from politics.

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Jeanette von Wolfersdorf She is an economist specializing in transparency and sustainability. She is the author of ‘Capitalism’ (Taurus) and a member of the Fiscal Council. Autonomous.

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