For a few decades, Chile was very interesting for fans of free markets.
The country became famous for its system of personal retirement accounts,
but there were many other reforms that liberalized the economy. Everything from free trade to privatization.
Unsurprisingly, Chile quickly became the richest nation in Latin America, surpassing countries such as Argentina and Venezuela that foolishly embraced bigger government.
But in recent years, Chile has become very interesting for fans of political drama.
- In 2019, there were big protests by the left, initially triggered by an increase in subway fares in Santiago.
- In 2020, the left enjoyed a victory as the country voted overwhelmingly in favor of writing a new constitution.
- In 2021, the left enjoyed another victory when former student activist Gabriel Boric was elected president.
- In 2022, the pendulum swung back to the right as voters overwhelmingly rejected a left-wing constitution.
- Now, in 2023, the right enjoyed another big victory in yesterday’s election for a Constitutional Council.
In a report for Bloomberg, Matthew Malinowski and Valentina Fuentes explain what just happened.
Chile’s political right dealt a crushing blow to the government of President Gabriel Boric that will undermine the young leader’s progressive agenda…right-wing candidates won 33 seats Sunday in a Constitutional Council in charge of drafting a new charter.
This is above the three-fifths majority needed to push through articles at will… Left-wing contenders obtained 17 spots… A prior attempt to rewrite the charter was overwhelmingly rejected in a September referendum out of concern it went to far to the left, overhauling the foundations of Chile’s free-market economy…and weakening political checks and balances. …The election serves as a harsh reality check for Boric’s left-wing administration as it seeks to revive its progressive agenda, including plans to increase taxes on the rich.
I started today’s column by noting that Chile was interesting for fans of economic freedom and then shifted to explaining why it was an interesting country for fans of political drama.
Let’s close by revisiting the implications for economic policy.
The obvious good news is that there presumably no longer is any danger that Chile will be saddled with a leftist constitution (filled with “rights” to other people’s money).
But I’m more interested in whether yesterday’s election results indicate a rebirth in support for free enterprise.
Chile enjoyed enormous gains thanks to economic liberalization, with the poor enjoying disproportionate gains. But I worry that the nation will get caught in the “middle-income trap” without additional limits on the size and scope of government.
That won’t happen with Boric still in power, so we’ll have to see what happens in the next general election.
International Liberty 
[…] Chilean voters want no part of a new constitution based on climate change and socialism. Economist Dan Mitchell has more commentary on this big defeat for the left, here. (See this, […]
Yeah, but Argentina, unlike Reagan, has no interest in enslaving women as breeder dams. No amount of cartel fascism offsets that appreciation of individual rights.
[…] Hope for Chile […]
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While I have spent 2-5 weeks at a time in Chile and loved it. Fortunately, I have not experienced the bad things mentioned here. As the comment states, the medical has been good and reasonably priced. A plus. When discussing politics, most of those with whom I spoke would say the socialist president (there have been a couple over the years) says he/she is socialist, but mostly is not in policies. Hope springs eternal. Let’s hope Chile chooses the right path.
Chile has many positive points and also big downsides. They certainly dodged a bullet by not approving the socialist constitution—and that is one positive, the socialists call themselves socialists, generally, which is another.
The country suffers from a big VAT, which is a hidden sales tax on everything with few exceptions. The customs officers are a group united by heredity—someone has to die before there’s a job opening, which then goes to a family member. Customs is paid on commission, they get paid extra for charging more fees. They will say a pallet of goods has too many items, and thus must be separated into four pallets. They charge $100 a pallet, minimum. And then they charge “box washing fees” which means who knows what, plus I doubt it. A small Chilean manufacturer told me that he can never quote a job, because he never knows what it will cost for parts to be imported. The duty on cigars is 100%. If you bring your laptop with you, they’ll claim it’s new and charge you import tax.
And then there are the notaries, who fill much of the niche that attorneys do in the states. You can’t have a binding bill of sale for selling a computer without having a notary involved. The lines are tremendous to see one, every day they’re open. It’s very difficult for foreigners to open bank accounts. Crime is rampant, including gunfights in the streets. There are some neighborhoods that police just don’t visit in Santiago. This is due to judges letting repeat criminals off easy, and also due to the police being less than willing to arrest offenders for that reason. Pickpockets from all over learn their trade in Chile, and practice on the metro. You shouldn’t use your cell phone on the bus or someone will grab it, you can’t leave anything at a table in the restaurant or it may be stolen. You can’t leave anything in your car, even in the trunk.
The country has a streak of inbred dishonesty, to the point that you can’t believe a label on any product. Have an ABV %? It’s a lie. Say “no preservatives”? It has preservatives. People there will lie to you about everything. Customer service as known in the US is non-existent. Once employees become managers, they no longer work or speak to customers.
On the plus side, you can incorporate and sell securities online. You can sell alcohol online. You can distill at home, as long as you don’t sell it, and if you want to create a big stock ahead of getting a license, you can do that too. You can grow cannabis at home, sex work is more or less legal and they have an app for that. Doctors will see you on short notice and they’re sensibly priced, even if you don’t have the national health insurance.
I wish the Chileans luck. They’re going to need it.