Chile ETF Surges on Deal to Rewrite the Constitution | ETF Trends

The Chile country-specific ETF led the charge Friday, with Chilean markets enjoying their best gain in almost two years, on optimism that a new constitution will help end protests and riots that have threatened the economy.

The iShares MSCI Chile ETF (NYSEArca: ECH) surged 11.4% on Friday.

Chilean markets rallied after lawmakers agreed to hold a referendum on rewriting the Pinochet-era constitution, giving way to protester demands after violent riots in response to the country’s unequal social and economic model, Reuters reports.

The two-page “Agreement for Peace and a New Constitution” was signed by parliamentarians after midnight following intense negotiations. The new agreement outlined a “commitment to re-establish peace and public order in Chile.”

“We don’t know if this will put an end to all the protests, but it will certainly help,” Rodrigo Rojas, who manages $500 million at Toesca Asset Management, told Bloomberg. “The agreement improves visibility for the market versus what we had just 24 hours ago.”

Chile’s current Magna Carta lacks legitimacy, Say Critics

Critics argued that Chile’s current Magna Carta, which was written and approved under General Augusto Pinochet’s 1973-1990 military dictatorship, lacks legitimacy. There is broad support for reforms, with almost three-fourths of surveyed participants in Chile revealing that protests should go on.

The violent protests in response to the growing divide between affluent and impoverished Chileans may have cost as many as 300,000 jobs, caused vandalism in almost one in three supermarkets and led to the deaths of 20 people, with law and order breaking down.

Analysts are now worried of the potential for the economic and social model that previously supported 30 years of outperformance in Chile and paved the way for the Latin American country toward developed market status may be thrown out.

“Consensus on content will be needed,” Fernan Gonzalez, an analyst at Banchile, said in a note. “Equities should re-rate after the agreement and the sell-off.“

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