In Chile, the rejection of the constitutional rewrite will likely increase civil unrest and spur further efforts to implement constitutional changes, leading businesses in the extractive industry sector to take a wait-and-see approach in making large financial decisions. On Sept. 4, Chilean voters overwhelmingly rejected the 2021-2022 constitutional rewrite, with 62% voting to reject and only 38% voting to approve in an election that saw nearly 86% turnout of eligible voters, an unexpectedly high level. Leftist Chilean President Gabriel Boric accepted the result — which saw an even larger margin of defeat than polling had suggested — while also calling for a dialogue with centrist and right-wing parties to develop a new constitutional proposal that would better unite the country. 

• In 2020, 78% of voters voted in favor of writing a new constitution to replace the country's current business-friendly constitution, which entered into force in 1980 under the dictatorship of Augusto Pinochet. It had come to be seen as having fueled economic growth at the expense of broader societal welfare. 
• Key aspects of the 388-article constitutional rewrite included eliminating the upper chamber of Chile's federal legislature and giving regional governments greater powers by deeming the country ''plurinational.'' It also would have created new public sector institutions for healthcare and education, as well as granted more Indigenous and environmental rights. 

Following the defeat of the constitutional rewrite, unrest is likely to remain high and authorities will try to appease grievances by still pushing to make some constitutional changes in the 18 months, portending political instability that could complicate policymaking. As the constitutional rewrite sought to address perceived social injustices in Chilean society, activists are likely to periodically stage disruptive demonstrations in major cities, such as the capital Santiago, that are likely to target public transportation infrastructure and could see violent clashes with security forces. The upcoming anniversary of the widespread demonstrations that broke out in October 2019 (which initially spurred the constitutional rewrite) will likely serve as a catalyst for renewed demonstrations, as popular grievances remain unaddressed. Additionally, Indigenous extremist groups, such as Weichan Auka Mapu and Coordinadora Arauco-Malleco, are likely to increase attacks against the forestry and other extractive industries in response to the failure of the constitutional rewrite, which would have provided Indigenous groups with increased rights and autonomy over their ancestral lands. In response, elected officials will attempt to appease public demand for structural change, as Boric has already stated his intent to begin a new constitutional rewrite process in 2023 and some members of Congress have suggested adding amendments to the country's existing constitution. However, these efforts could lead to competing processes to enact constitutional changes, potentially heightening political tensions between the executive and legislative branches. This, in turn, may hinder Chile's ability to confront more immediate needs, such as high inflation (expected to reach a 28-year high at 13% by the end of 2022), along with a wave of immigration that has led to violent clashes between immigrants and local communities. 

• While Boric's coalition has the legislative majority needed to pass constitutional reforms, the various parties inside the coalition are ideologically fragmented. This will likely hinder the coalition's ability to agree on new proposals, as evidenced by the fact that the Senate has rejected previous proposals from the Boric government.
• Frustration with the country's growing inequality prompted an unprecedented 10% of the population to participate in nationwide protests between late 2019 and early 2020. In response to the demonstrations, former President Sebastian Pinera agreed to hold a referendum to decide if the country should rewrite its constitution, the result of which was rejected on Sept. 4. 

The rejection of the constitutional rewrite will avoid a major near-term collapse in Chile's business climate by decreasing the threat of immediate regulatory changes. But the government's pledges to enact future constitutional amendments, combined with its push to increase taxes on companies operating in the country's extractive industry, could still deter investment and make Chile an overall less competitive market for lithium and copper. The rejection of the constitutional rewrite means that the current regulatory scheme for the country's business sector will remain in force in the near term. This will temporarily ease concerns among companies operating in Chile's land- and water-intensive extractive industries (like copper, lithium and forestry), which rely heavily on the concessions model for resource use that's enshrined in the country's current constitution (which the failed rewrite sought to change). However, government efforts to increase taxation on mining through legislation, along with the Boric administration's vague promise of a future constitutional rewrite or amendment process, will likely still dampen investor interest in Chile's mining and other extractive industries by casting doubt on the country's long-term regulatory landscape. The potential for increased taxes and more red tape — combined with volatility in global commodity prices — could make companies particularly wary of launching new copper and lithium projects, as such mines can take years to begin generating a profit due to the traditionally long lead times between development and production. This could, in turn, see Chile become an overall less attractive country for mining, potentially driving investors to other major copper and lithium producers such as China, Australia, Peru and the United States.

• Chile's current constitution ensures that almost every mineral or subsistence is available for concessions, but the failed constitutional rewrite planned to leave the concession model to be determined by legislation. This would have increased investor uncertainty as laws could have been subject to different interpretations and future changes. 
• Chile's mining sector generates roughly 10% of its GDP and over 50% of its total exports.
• As part of a broader tax reform proposed in July, the Boric administration is seeking to increase the share of revenue the Chilean government receives from privately-owned copper and lithium operations in the country by implementing a progressive tax that varies between 5% and 14% when sales exceed 50,000 tonnes of fine copper. The proposed legislation is currently under debate in Congress. In August, mining companies Antofagasta and Anglo American indicated they would review any future projects in Chile should the legislation be approved.