Chile – Tracking the process of the new constitution

On Sunday, October 25t h , Chileans will embark on a two-year process to re-write their constitution. The process and the outcome will surely affect markets. However, a key question is how to isolate and measure the impact of such an unprecedented process on markets when considering competing forces such as the price of copper, weakening dollar, and US equity volatility. In this note, we propose a simple methodology for quantifying the impact of political risk premium associated with the complete revamping of the constitution. We will update our model periodically and report on the movements of the political risk premium.