A new report by Bova warns of the economic risks of the new constitution and says that Chile enters the stagflation scenario

Reports from banks and international entities about the new draft constitution have been in the spotlight in recent weeks. The Bank of America (BofA) recently warned of the investment uncertainty assumed by the text to be submitted to a public referendum, and this Tuesday in a new report the entity indicated that the proposal presents significant economic risks to the country.

“In our view, the draft new constitution carries significant economic risks despite excluding the most radical proposals,” Bank of America said in a new report.

On the other hand, the bank noted that “the draft of the new proposal for Chile’s constitution is better than expected three months ago, as most of the radical proposals were excluded. However, in our opinion, it still poses significant risks to the economy: including investment risks, institutions The weak, the greater role of the state in the economy.

Of course, the entity said the principle of fiscal sustainability is good news, as it allows for phased implementation. But he insisted there was a lot of uncertainty regarding the implementation of the new Magna Carta, should it win approval in the exit referendum. Similarly, BofA noted a rebound in consent option according to a recent Cadem survey.

The BofA report also commented on increased approval of President Gabriel Borek, according to a Cadem survey last Sunday, right after the president’s first public reckoning.

He reiterated his ambitious campaign proposals that would lead to a significant increase in spending through health and pension reform, the construction of 260,000 homes in four years, and the Student Loan Forgiveness (CAE) bill, among others. The president also re-imposed a state of emergency in the south.”

The bank also noted the economic slowdown the country is going through, and the high inflation that Chile has faced in recent months. He pointed out that we are entering a scenario of inflation accompanied by stagnation.

The economy is going through a phase of stagflation after last year’s growth of 12%. Inflation remains very high, and is forecast at 1.1% in May by the Bloomberg consensus, compared to 1.4% in April. Inflation is expected to peak near 12% y/y in June.

Finally, they also referred to the decision to be taken by the central bank on Tuesday, when the interest rate is expected to rise again. Bofa Bank estimates the rally will be 100 basis points to 9.25%.