Chile presidential race heated up as leftist candidate Frei surges to the front

(The following statement was released by the rating agency)

Sept 21 – Chile’s tight presidential race took a turn for the worse on Friday as leftist candidate Eduardo Frei, who was trailing behind his centrist opponent right up until a third debate on Thursday, suddenly jumped to the front of the race with double-digit poll leads over the other candidates. The results come one day before preliminary results in which Jair Bolsonaro, a far-right congressman and former Army captain with strong support among conservative voters, is widely expected to get the most votes and thus go on to face Mr. Frei in a run-off election on Nov. 17.

However, voters in Santiago’s top 2,600 electoral districts were not expected to decide the election until Sunday and there is still a possibility of Mr. Frei and Mr. Bolsonaro breaking with a tradition of the Chilean right side losing the first round of the presidential election and the Chilean left side winning the second round.

Mr. Frei’s surge could come at a cost for businesses in the stock market and peso currency as he proposed a far-reaching pension reform to reduce the fiscal deficit and require better management of public accounts to contain public debt. By contrast, the Bolsonaro-backed free-market candidate, Sebastian Pinera, showed more flexibility on pension reform and pension contributions during the runoff debate on Thursday.

The spread between the current yield on Chile’s 10-year sovereign bonds and its benchmark U.S. 10-year Treasury note has narrowed slightly to +24.80 basis points from +27.40 on Thursday and the peso dropped more than 1% to 574.00 to the dollar in late local trade.

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