Fabian Cambero

SANTIAGO: Chilean traders, investors and analysts are on edge ahead of Friday’s unveiling of President Gabriel Boric’s Cabinet. It is expected that this will be a significant signal to markets regarding how Boric may lead the Andean producer nation.

Boric is a former student leader and lawmaker, 35 years old. He won Chile’s presidential election last year, promising major reforms to Chile’s market-driven economic model.

Since then, he has tempered his tone, helping to boost Chile’s market and propelling the currency to the highest performing world currencies so far this fiscal year. There is speculation that he may name a technocrat relative to him as the head of the finance ministry.

On Friday morning, the peso currency climbed to below 800 USD for first time since November.

Chilean peso has rallied from record low: https://graphics.reuters.com/CHILE-ASSETS/PESO/gkvlgbynbpb/chart.png

Jorge Selaive from Scotiabank Chile said, “A portion of the political risk that hindered the Chilean peso in October 2019 has receded.” He added that the market had been expecting a moderate left-wing candidate for the economic portfolio.

Boric has kept his cards close, but names for the finance ministry that have drawn speculation include current central bank chief Mario Marcel and market-friendly economists such as Guillermo Larrain, Roberto Zahler or Máximo Pacheco.

Chile was a world leader in vaccine rollout and ended the year as the best performing economy. This is due to large government spending and several rounds private pension withdrawals that helped reduce the effects of the COVID-19 pandemic.

Boric, who takes office March 11, must accept the signs of an inflation and overheating economic environment.

Oxford Economics stated in a report that Boric will face the greatest challenges of cooling the economy and maintaining popular support. They also added that the young leader would be under pressure to raise social spending, while still meeting stricter budget targets.

Boric made a pledge during the campaign to “bury Chile’s market-oriented model. This has led growth in Chile in recent years but also has deepened inequality. It triggered months of protests at 2019’s end.

He promised to overhaul the private health and pension systems, and to raise taxes in order to fund greater social spending.

Boric faces however a fractured Congress that analysts believe will make it difficult for him to adjust and find consensus with more centrist segments.

Chilean peso has rallied from record low https://tmsnrt.rs/3rEpA0i

Chilean peso has rallied from record low (Interactive) https://tmsnrt.rs/3qL0Uny

Latin America bond yield spreads https://tmsnrt.rs/3ryvBvG

Latin America bond yield spreads (Interactive) https://tmsnrt.rs/3KumAMH

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