Chile’s Constitutional Whiplash

Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: The far-right triumphs in elections for Chile’s new constitutional council, Ecuador finalizes a record-breaking debt-for-nature swap, and an Argentine-born novelist wins a Pulitzer.

In a dramatic political reversal, an election in Chile last Sunday put right-wing parties in control of a constitutional rewrite process that had long been demanded by progressives. The outcome was a major defeat for left-wing President Gabriel Boric.

In 2019, a hike in subway fares sparked leftist-led mass protests across Chile—and calls for a new constitution. Demonstrators argued that the country’s existing charter, penned during the 1973 to 1990 dictatorship of Augusto Pinochet, contained provisions that entrenched economic inequality. After weeks of unrest, conservative then-President Sebastián Piñera and lawmakers allowed for a referendum that triggered a rewrite.

In May 2021, Chileans elected mostly independent and left-wing candidates to the assembly tasked with drafting their new constitution. That December, Boric—a former lawmaker and student activist—was elected president in a close runoff against far-right candidate José Antonio Kast; Boric campaigned on the rewrite, while Kast lobbied against it. But the new document was far from a done deal: After the elected convention produced a lengthy progressive draft constitution, conservatives and some centrists slammed it as vague and too radical. A national plebiscite voted down the new charter in September 2022.

Polls at the time suggested most Chileans still wanted a new constitution, though, so Boric urged Chile’s Congress to go back to square one. Lawmakers agreed that a group of experts would prepare a rough draft for a new constitution before handing it off to a popularly elected convention. That is how Chileans came to vote on a fresh drafting committee last Sunday, almost exactly two years after the first was chosen.

But this time, right-wing candidates triumphed—and now control more than the three-fifths portion of the committee needed to approve articles; Boric’s coalition lacks the votes to veto them. Kast’s far-right Republican Party holds more seats than any other in the new assembly, and the document they draft will face a nationwide referendum in December.

It’s unclear whether the right-wing majority will try to create a moderate charter in the hope of winning broad approval among voters or swing so far right that voters prefer to keep the current, Pinochet-era constitution. Regardless, Sunday’s vote prompted a flood of Chilean commentary that Boric had become a lame duck just over one year into his term, which ends in 2026.

One key difference between the May 2021 and May 2023 constitutional assembly elections was turnout, journalist Ascanio Cavallo wrote in El País. In May 2021, voting was optional, so only more politicized Chileans—who skewed left, according to Cavallo—participated. But both the 2022 referendum on the draft and Sunday’s election were mandatory and thus included voters who were “previously silenced, conservative,” and “much less prone to radicalism,” he wrote. Voter turnout in May 2021 was under 50 percent, while it was 84.9 percent this week, according to Chile’s election authority.

Public anxiety about crime also appeared to have played a role. Chile’s homicide rate in 2022 rose by nearly a third from its 2021 rate, and crime—a problem the Chilean (and Latin American) left have not traditionally focused on addressing—increasingly dominates headlines.

“While there were many reasons [for the results in Sunday’s vote], including public anger over inflation and missteps by President Gabriel Boric and his leftist allies, one stood out: fear over violent crime,” Americas Quarterly’s Brian Winter wrote. Kast referenced anecdotes of crime throughout his campaign and advertised that his party supports allowing more civilians to carry guns as well as the creation of an anti-gang security force.

Boric’s allies, on the other hand, appeared to play down citizens’ concerns with security ahead of the election, Kenneth Bunker of analytics group TresQuintos told Ex-Ante. “People are not voting for the Republican Party because they think they have the best positions to write a constitution: they are voting for them because they’re worried about their day-to-day lives.”

Boric still has nearly three years of his presidential term left, and many of his flagship goals, such as tax reform, have not passed. Speaking about the constitutional rewrite process on Sunday night, he said that the first constitutional convention failed because “we didn’t know how to listen to each other amid a group that thought differently.”

Boric’s comments suggest he may look toward the political center as he tries to negotiate the rest of his legislative agenda. But the newly empowered far right may not let him get very far.

Saturday, May 13 to Sunday, May 14: Former Brazilian President Jair Bolsonaro attends summit for right-wing politicians in Portugal.

Saturday, May 20 to Monday, May 22: Ecuadorian lawmakers are slated to hold a final vote in the impeachment trial of President Guillermo Lasso.

Tuesday, May 30: Brazilian President Luiz Inácio Lula da Silva hosts summit for South American leaders.

A scientific look at sanctions. In a new study for the Center for Economic and Policy Research, Venezuelan economist Francisco Rodríguez reviewed 32 quantitative papers on the human impact of economic sanctions. He found that nearly a third of the world’s economy is now subject to United Nations or Western sanctions, a share that has risen sharply in recent years.

In 30 of the 32 studies Rodriguez reviewed, sanctions were found to have a negative effect on human development outcomes such as poverty, mortality, and inequality. In Venezuela, as in Iran and Afghanistan, sanctions on governments’ access to foreign currency hampered their ability to provide people with basic goods. Sanctions also had a negative effect on the private sector, including on humanitarian groups. The evidence that sanctions achieve their desired policy outcomes (such as getting a foreign leader to change their human rights stance) is “extremely spotty,” Rodríguez wrote, but the evidence that they cause human suffering is overwhelming.

While recent U.S. administrations—of both parties—have dialed up the number of new economic sanctions they apply each year, a recent Harris poll suggests that the U.S. public is not comfortable with such a widespread use of sanctions. Fifty-eight percent of people surveyed said they believe sanctions should be lifted “if they damage economic activity and livelihoods of ordinary citizens,” up from 49 percent of respondents in 2021.

That unease has reached the U.S. Congress. On Wednesday, 21 Democratic lawmakers published a letter calling on President Joe Biden to lift the sweeping sanctions that the Trump administration applied on Cuba and Venezuela and review preexisting sanctions policies to improve social conditions in those countries and reduce a cause of northward migration.

The effort—led by Texas Rep. Veronica Escobar, a co-chair of Biden’s reelection campaign—came just a day before the United States was set to lift a pandemic-era border measure known as Title 42.

AMLO challenged in court. In March, Mexico’s Supreme Court paused the implementation of President Andrés Manuel López Obrador’s overhaul of the country’s election authority, the National Electoral Institute (INE). This week, the court ruled that part of the overhaul was unconstitutional due to its hasty passage in Mexico’s Congress, striking down changes that would have allowed sitting politicians greater liberties to spread publicity materials during campaigns.

Still up for deliberation are the reform’s budget cuts to the INE. The overhaul sparked the biggest ever protests against López Obrador’s government.

The Argentine writer Hernan Diaz poses at a festival near Paris on Sept. 22, 2018.

The Argentine writer Hernan Diaz poses at a festival near Paris on Sept. 22, 2018.

The Argentine writer Hernan Diaz poses at a festival near Paris on Sept. 22, 2018.Sophie Bassouls/Sygma via Getty Images

An Argentine look at American dreams. Argentine-born writer Hernan Diaz won the Pulitzer Prize for fiction this week for his novel Trust. Diaz has lived in the United States for decades and writes in English, but he is deeply connected to Latin American literary traditions: He edits a Spanish-language academic journal and wrote a book about Argentine writer Jorge Luis Borges.

Trust follows the story of a business tycoon in 1920s New York and reflects Diaz’s longtime observations about the American literary canon. While much of American literature deals with themes of social class, it often shies away from openly discussing how money is made and affects human relationships, he told El País. The Pulitzer jury called Trust “a complex examination of love and power in a country where capitalism is king.”

The novel has four sections. The first is a novel-within-a-novel that gives one narrative about the businessman protagonist’s rise, while a following section is the diary of his female ghostwriter, which challenges the protagonist’s version of the story. Diaz has said in interviews that another theme of American literature he has grown to question is the fact that its foundational heroes—such as cowboys and tycoons—are all men. The world of money and power, in particular, was narrated as “a womanless world” he told Vanity Fair. “That to me was extremely meaningful and demanded some sort of intervention.”

In which of the following Latin American countries are no current or former officials subject to U.S. sanctions?

While there have been some strains in the U.S.-Bolivia relationship in recent years—including Bolivia’s threat to boycott last year’s U.S.-hosted Summit of the Americas—those did not lead to economic sanctions.

An aerial view of the Bartolomé Island, part of the Galápagos Islands, in Ecuador on April 15.

An aerial view of the Bartolomé Island, part of the Galápagos Islands, in Ecuador on April 15.

An aerial view of the Bartolomé Island, part of the Galápagos Islands, in Ecuador on April 15.Carlos Espinosa/AFP via Getty Images

It’s been a big week for Ecuador. President Guillermo Lasso—who learned on Tuesday that he will soon face an impeachment trial in the opposition-controlled Congress—announced two major economic deals. The first, a free trade agreement with China, still requires Ecuadorian congressional approval and stands to increase Quito’s non-oil exports to China by $3 billion to $4 billion over the next 10 years, Ecuador’s trade ministry said.

The second deal, which Ecuador and several other international partners have confirmed, amounts to the biggest debt-for-nature swap in world history. The agreement is designed to generate more than $1 billion in savings for Quito and guarantee that a portion of that money goes to protect a marine reserve around the Galápagos Islands.

Debt-for-nature swaps are built on the acknowledgement that high debt burdens often prevent countries from meeting their green spending goals. The world’s first such deal was carried out in Bolivia in the 1980s. The environmental group Conservation International and a private family foundation bought Bolivian debt at a lower-than-market price, and Bolivia used the money it saved to fund the protection of a nature reserve in the Amazon Basin.

In Ecuador’s newly announced deal, the country exchanged $1.6 billion in outstanding debt for a new loan of only $656 million in a transaction brokered by Credit Suisse. The bank bought the debt from unnamed investors and is reselling it to buyers that include a Swedish pension fund.

The deal required convincing creditors for the former $1.6 billion in debt to take an average loss of 60 percent when they sold it, the New York Times reported. Creditors might agree to participate in such a deal for the reputational boost or because they are worried the borrowing country—in this case, Ecuador—will default on its debt anyway.

The Inter-American Development Bank provided financial support to carry out the deal, while the U.S. International Development Finance Corporation provided insurance. That means that if Ecuador does not pay back its new bondholders, the U.S. government is on the hook.

The deal took around three years to finalize and was championed by Ecuador’s former environment minister, who has since become foreign minister.

While green debt swaps are often described as win-wins, scholars say they carry some potential downsides. One is high transaction costs. Belize reduced its debt load by $189 million with such an agreement in 2021, but is also paying around $86 million in fees including audit costs and insurance premiums, according to the Nature Conservancy, which helped set up the deal. Belize’s finance ministry told Bloomberg the country’s transaction costs were lower, at only $14 million.

Another potential downside is that swaps have often not made significant dents in countries’ overall debt loads, according to research by the African Development Bank and the International Monetary Fund.

Still, debt-for-nature swaps can help bring new actors into the development finance system, the Center for Global Development’s Bernat Camps Adrogué and Mark Plant wrote last December. And they do act to both reduce country’s debt loads and guarantee investments in conservation.

Although the full fine print of Ecuador’s deal was not immediately published, its organizers announced that the country will be able to decide for itself how to use more than half of the savings generated by the deal, which do not necessarily need to be allocated to environmental projects. More than $300 million will go to ocean conservation.

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