(Bloomberg) — Chileans gave the ruling, center-left coalition a bloody nose in municipal elections Sunday after more than two years of sluggish growth and bitter disputes over education, pension and labor reforms. The peso posted the biggest gain among major emerging market currencies.
Candidates that back President Michelle Bachelet won 141 mayoral seats, down from 167 in the previous local elections in 2012, while the main opposition coalition saw the number of neighborhoods it controls rise to 144 from 121, according to final results. Only one in three of the 14.1 million electorate chose to vote, the lowest participation rate since the dictatorship of August Pinochet ended in 1990.
For many voters, Bachelet has gone too far in her attempts to reform the free-market economic model imposed under Pinochet, as the economy posts the slowest sustained growth in more than 30 years and business sentiment tumbles. For another group, she hasn’t gone far enough after hundreds of thousands marched through the streets in the past few years demanding improved education and pensions. Many other voters have lost their trust in politicians after a series of financing scandals tarnished the reputation of parties across the political spectrum.
“People are not feeling that the government’s push for reforms is improving their well-being,” said Claudio Fuentes, a professor at Universidad Diego Portales in Santiago. “The government should limit its agenda of reforms and focus on the things that are really important to people.”
The peso strengthened 1.1 percent to 659.17 per dollar at 4:56 p.m. in Santiago, the biggest move since Sept. 6 as yesterday’s vote raised the prospect of an opposition victory in next year’s presidential election.
“The markets favor the victory of the opposition and they realize this result increases the possibility of a victory in next year’s presidential elections,” said Miguel Benedetty, a currency analyst at INTL FCStone Ltd.
Chile, South America’s wealthiest economy, has averaged economic growth of more than 5 percent over the past 32 years. For the past three years, though, growth has slowed to about 2 percent following a slump in the price of copper, Chile’s leading export, and a drop in business and consumer optimism that many blame on Bachelet.
“Chile has spoken, both inside and outside the ballot box,” Bachelet said after the election. “The government coalition has lowered its level of support in several places. We need to heed the warning signs.”
The ruling coalition that Bachelet heads has dominated Chilean politics for 26 years, holding the presidency for all but four of those years and controlling a majority of municipalities — until yesterday.
“Chile wants, needs a change,” said Sebastian Pinera, former president for the right-wing coalition. “Today we have taken a great step towards the change that Chile needs.”
Yet, many voters didn’t turn to the coalition that backs Pinera. Independent candidates won 52 mayoral seats, compared with 41 four years earlier, with their percentage of the vote rising to 17.4 percent from 10.9 percent. One of those was a former student leader, Jorge Sharp, who won a landslide victory in the port city of Valparaiso on a left-wing platform outside of Bachelet’s coalition.
(Updates with peso move in first paragraph, final results in second.)
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