Chile’s presidential election, scheduled for later this year, is already causing ripples across the border in Argentina, particularly for shoppers in Mendoza province. [[1]] The political uncertainty surrounding the race is impacting financial markets, and most notably, the value of the Chilean peso, which recently hit a one-year low against the U.S.dollar at 910 CLP. This shift is poised to alter the cost of goods and services for Argentinians who routinely cross the border to shop in Chile.
Chile’s upcoming presidential election is impacting cross-border economic activity, particularly for shoppers in Argentina’s Mendoza province who frequently travel across the border. The political uncertainty surrounding the election has already reverberated through financial markets.
The U.S. dollar closed its last trading session in Chile at $910 Chilean pesos, its lowest level in over a year. Market projections suggest this trend could accelerate with a potential victory for right-wing candidate José Antonio Kast, further increasing the cost of goods and services in Chile for Argentinian consumers.
A Weaker Dollar, a More Expensive Chile
Experts consulted by Chilean news outlet Emol.com indicate that expectations of a more market-friendly government are reducing regulatory uncertainty and attracting investment, strengthening the Chilean peso and driving down the price of the dollar (USD/CLP). This dynamic reflects investor confidence in a potential shift in economic policy.
Analysts project that, should this electoral scenario materialize, the Chilean exchange rate could fall to a floor of $885 CLP per dollar in the coming weeks.
This strengthening of the Chilean peso is negatively impacting the purchasing power of Argentinian shoppers.
How Much More Will Shopping in Chile Cost?
Calculating the cost of Chilean products for Argentinian consumers requires converting between the two countries’ dollar rates. First, the number of dollars obtained with $1,000 CLP is determined (by dividing $1,000 by the dollar price in Chile), and that amount is then multiplied by the selling price of the dólar blue in Argentina, which closed at $1,445 ARS, the lowest rate available.
Using $1,000 CLP as a reference point, the difference is significant:
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Cost of $1,000 CLP at the current rate ($910.70 CLP): $1,586.88 ARS
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Cost of $1,000 CLP with the Kast projection ($885 CLP): $1,632.71 ARS
Calculation Conclusion:
A Kast victory and a subsequent drop in the Chilean dollar to $885 would mean Mendoza residents would pay $45.83 ARS additional for every $1,000 CLP on the blue market ($1,632.71 ARS – $1,586.88 ARS), making shopping and tourism more expensive for cross-border travelers.
Historical Data
Historically, Chilean presidential elections generate high volatility in financial assets, with the exchange rate being particularly sensitive to these shifts. This phenomenon is crucial, as the expectation of calm and a falling Chilean dollar is contingent on the election results not surprising investors.
According to an analysis by investment platform XTB Latam, the largest exchange rate shock typically occurs on the first trading day following the election (D+1). The most significant movement in the last 20 years occurred in December 2021, following Gabriel Boric’s victory over José Antonio Kast. On that day, the dollar experienced a historic jump of $35 Chilean pesos.
However, specialists point out that this initial readjustment doesn’t always set the long-term trend. Gonzalo Muñoz, a markets analyst at XTB Latam, explained that the 2021 variation occurred “from a very high starting point for the exchange rate, suggesting rather a partial normalization of the risk premium accumulated before the election.” Ignacio Mieres (XTB) added that if the outcome doesn’t change the scenario the market anticipated, the window of greatest volatility is usually D+1. After this first day, the market tends to digest the information and be more influenced by signals of governability and fundamentals.
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Bachelet Election (Left, 2006): The dollar started at $524.74. The next day (D+1), it rose to $526.99 (+0.42%). Five days later (D+5), the currency was at $531.03, accumulating a gain of +1.19%.
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Piñera I Election (Right, 2010): The initial exchange rate was $488.93. On D+1, it rose to $492.13 (+0.65%). After five days, the dollar reached $505.70, with a cumulative variation of +3.43%.
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Bachelet II Election (Left, 2013): The initial rate was $529.92. The next day, the dollar fell to $527.18 (-0.52%). After five days, the value remained at $529.98, with a virtually unchanged variation of +0.01%.
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Piñera II Election (Right, 2017): The dollar began at $636.00. D+1 saw a decrease, reaching $621.27 (-2.32%). Five days later, it stood at $622.59, with a cumulative decline of -2.11%.
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Boric Election (Left, 2021): With a dollar at $836.38, the jump on D+1 was significant, reaching $874.00 (+4.50%). After five days, the value moderated slightly to $864.28, closing with a gain of +3.34%.
