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Explained | What Chile aims to achieve with a new constitution

A man rides a bicycle past a wall a graffiti reading ‘Chile decides’ in Santiago, on October 23, 2020, two days ahead of a referendum to change a dictatorship-era constitution seen as the bedrock of the nation’s glaring inequalities.

A man rides a bicycle past a wall a graffiti reading ‘Chile decides’ in Santiago, on October 23, 2020, two days ahead of a referendum to change a dictatorship-era constitution seen as the bedrock of the nation’s glaring inequalities. | Photo Credit: AFP

Overview: In October 2020, 78 per cent of Chileans approved a proposal to draft a new constitution. A year earlier, the then right-wing President Sebastian Piñera had approved this referendum following large scale protests which saw over a million people taking to the streets – initially triggered by a hike in the Santiago Metro fare.   

The current left-wing President Gabriel Boric – also a prominent face of the protests— aspires to reform the country’s health, education, housing and pensions system while being “fiscally responsible,” according to Reuters. He assumes the top office at a time when the country’s economy is fragile— experiencing high inflation, reeling under the impact of COVID-19 and surrounded by uncertainty owing to the Russia-Ukraine conflict.  

Chile and its constitution at a glance

According to the World Bank, Chile has been among Latin America’s fastest-growing economies in recent decades. However, more than 30 per cent of the population is economically vulnerable and income inequality remains high. The 2019 protests sought reforms to address this inequality, spurred by the involvement of private sectors in social realms. 

The previous constitution was drafted during military dictator Augusto Pinochet’s regime. Several amendments were made in 2005 during Ricardo Lagos’ presidency, prominent among them being the reduction in the presidential term from six to four years and the curtailing of the special powers of the armed forces. Extensive amendments removed constitutional provisions regarding the appointment of ‘senators-for-life’ and ‘appointed senators.’ 

The drafting of the new constitution

The constitutional convention in charge of the process commenced work in July 2021 and has until July 4, 2022, to finish drafting the new constitution. Following this, the President would have three days to call for a referendum to accept or reject the new constitution. The referendum is usually held two months after this. In other words, Chile will make a final decision about its new constitution on September 4 this year. 

The referendum in 2019 tackled two main points: firstly, whether the constitution should be changed at all; and secondly, whether the new constitution would be prepared by a constitutional convention of members elected directly or a mixed constitutional convention – consisting of both members of parliament and directly elected citizens in equal proportion. Seventy-nine per cent of voters suggested that a directly elected constitutional convention be entrusted with this duty. 

A second vote conducted between May 15 and 16 last year elected the members of the Constitutional Convention. The 155-member convention reserved 17 seats exclusively for indigenous people – ensuring representation of the varied communities constituting approximately 12.8 per cent of the country’s total population as per the 2017 census.  

Further, in order to ensure gender parity, it was mandated that neither gender can have more than 55 per cent representation in the convention. Also, independent members were to be in majority. 

The convention also reviewed inputs from citizens which had more than 15,000 signatures. They were sent to one of seven (of a total of ten) thematic commissions. The proposal currently under discussion relates to the political system, social equality, tax structure, fundamental rights, rights of nature, natural commons, culture, art, and heritage, among others. The process is still ongoing. 

After the proposals are prepared, they will be sent to the Plenary where a two-thirds majority is required for approval. If this majority is not achieved, then the commission will undertake a fresh discussion.

A Harmonisation Committee will take up the final review of the Chilean constitution – correcting formal inconsistencies and undertaking further substantiations if needed. As per the existing constitutional mandate, it is essential that the text of the new constitution respect the nature of the Republic of the state of Chile, the democratic regime, final and enforceable judicial decisions, and existing international treaties. 

What changes does the new constitution entail?  

Though the full text of the Chilean constitution is being prepared and would be tabled in July, the convention has already held discussions on reforming the pension system, ensuring representation of indigenous communities, environmental protection, and the question of what qualifies as ‘private property.’  

Pension system

Chile’s 1981 pension system mandated that all wage and salary workers pay a percentage of their gross earnings into a pension fund administered by varied private pension fund administrators (AFPs). In simple words, profit-making national or foreign liability companies managed social security funding. The then-Chilean government stated that the move was motivated by efficiency and fiscal concerns, and a wish to reduce the role of government in economic affairs.

The earlier system based on the pay-as-you-go mechanism had ensured that pensions were not subjected to financial market fluctuations. Further, the incumbent Finance Minister of Chile Mario Marcel had pointed out recently that the 1981 system allowed for a lower level of contributions from workers and companies compared to other countries. 

President Boric had proposed replacing the private sector-held system with a public one — among the biggest demands during the 2019 protests. Reuters, quoting Mr Marcel, reported in March this year that the government would send the long-awaited reform bill to Congress next year.  

According to ratings agency Fitch, the existing pension system’s assets are equal to about 60 per cent of the Chilean GDP. “Changes to the Chilean pension system could affect the ability of Chilean corporates to raise financing in the local market. The existing system encourages national savings and is the primary source of local financing for long-term investment projects used by many companies in the country,” it states. 

Mining

President Boric has been a proponent of increasing mining taxes and royalties. During his campaign, he had also proposed setting up a national lithium company. Chile is the world’s second-largest producer of lithium after Australia.

Fitch states that a change in direction could hinder investments in the sector, especially large long-term investments. It adds that potential concerns include the increased role of indigenous people in new project approvals, changes in property and water rights, and unclear terms of compensation if an asset is expropriated. 

Recent amendments have stipulated that the state has an “absolute, exclusive, inalienable and imprescriptible domain on all mines.” Exploiting natural resources (such as coal and copper, among others) has helped Chile prosper but fostered sizeable social inequality. However, the text of the amendment permits certain ‘mining concessions,’ only to be given if they serve the public good as determined by the judiciary.

Watch | Protests across the continents in 2019

Property ownership and the environment

The new Chilean constitution would grant freedom to own all properties and goods, except those which “nature has made common to all men” or which should be collectively owned by the country as a whole. A qualified quorum law would establish requirements for the acquisition of properties to better serve the interests of the nation, including considerations about national security, public health utilities, and preservation of the environment. It recognises that the environment must be preserved and it is the right of the community to live in an environment free of contamination. 

The erstwhile constitution’s 1981 Water Code let the government grant ‘free water rights’ to private entities. This ended up creating a market for water with the state unable to supply enough for domestic consumption. Bloomberg reported in February that a proposal to annul free water rights for private concerns was approved in an initial vote by the convention’s environmental committee.

This effectively means that mines, agribusiness and utilities would have to seek temporary permits to use water. Additionally, the revised mechanism would prioritise human consumption, stability of water reserves, and indigenous rights.  

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Printable version | May 17, 2022 6:43:50 pm | https://www.thehindu.com/news/international/chile-new-constitution-explained/article65413316.ece