Sebastián Edwards, on Chile: "Big global businesses follow the lithium issue more than the new Constitution"

The economist Sebastián Edwards at his home in California, United States.

Sebastián Edwards (Santiago de Chile, 69 years old) was very close to being part of the commission of experts that is currently drafting the draft of the new Constitution of Chile, which will be delivered on June 7 to the 50 conventions that will be elected this Sunday.

But, finally, the Chilean economist based in the United States, where he is a full professor of the Henry Ford II Chair at the University of California (UCLA), was left out.

The parties privileged his militants and he, who was the World Bank's chief economist for Latin America, had no chance to enter.

From his home in California, he regrets that decision and says that if he had been part of the organ, he would have acted as a "free thinker" and not as part of the two blocks that to date have not been able to reach agreements on such sensitive points as the architecture of the Social and democratic rule of law and the role of the private sector in health.

In this dialogue with EL PAÍS, he talks about the second constituent process and how it can affect the delicate economic moment that Chile is going through.

Ask.

Last March, he said that part of the better economic performance that was being seen at the beginning of the year was the product of the triumph of those who rejected the proposed new Constitution in September.

Is that factor still weighing or has its effect already exhausted?

Answer.

In March I said that the rejection of the first constitutional proposal was paying dividends, in the sense that it had given economic agents some certainty.

The radical and refoundational change proposed by the first constitutional convention would not take place and that helped in the investment.

But those dividends don't last forever.

The new activity data is not encouraging, but it is too early to tell if the country will enter a recession.

Q.

Do you see uncertainty among investors regarding the current constituent process?

A.

This is a narrower process, with what have been called

.

This limits, in part, the uncertainty.

But, in the end, what matters is the text that is written, and we still don't know much about that.

The

have gotten stuck in writing the details of their proposal and the constitutional council has not yet been elected [its 50 members will be elected by the citizens this Sunday].

We will have to see what happens.

Q.

What would be the best scenario of this election for the Chilean economy?

A recent JP Morgan report recommends overweighting Chilean stocks given the prospect that right-wing lists reach 50% of directors this Sunday.

R.

We do not want a paralyzed council, in which there is a

between two parties that do not give in.

This would lead to paralysis, which, of course, is not positive.

But neither do we want such a substantial majority that gives a group absolute freedom.

This was what happened at the first convention and it was very negative.

So, the ideal is that you have to talk, negotiate, debate, seek common ground to produce a document that can be approved by a very large majority in the plebiscite.

Let's say by 75% or more.

Q.

And what scenario could tarnish the economic situation in Chile?

A.

A big tie would not help, as it could lead to paralysis.

A landslide win wouldn't help either.

Ideally, you are forced to negotiate and reach broad and reasonable agreements.

The “herd” effect and academic activism

Q.

You were close to becoming part of the commission of experts, who are already working on a draft of the new Constitution.

How do you evaluate the work they have done so far?

R.

There are things that surprised me.

For example, it is very difficult for me to understand that experts and academics are grouped into two groups, the ruling party and the opposition.

That herd attitude is the very antithesis of academia and pundits.

There is a huge contradiction in that.

The truth is that if I had been named, I would not align myself with either of the two blocks.

He would be a free thinker, analyzing every rule, every line, every word on its own merit.

Having said that, and examining the texts produced, it seems to me that in their first stage they advanced well;

they made a fairly minimalist and reasonable draft.

From there they went on to partisan quarrels, which has messed things up.

I hope that common sense prevails and that in the time that remains they act as experts and not as activists.

Q.

Do you think that the draft that exists so far provides peace of mind to investors?

R.

What is there so far is reasonable, but investors know that it will not be what will be subject to citizen scrutiny.

What helps is that the strange and somewhat deranged ideas of the first convention are not glimpsed.

But the truth is that when it comes to investment, the world of big global business is following the lithium issue with more interest than the new Constitution.

Q.

Where are your main concerns in this second constituent attempt?

R.

It is necessary to take care that the Executive has the exclusive initiative to propose expenses.

The opposite is a sure recipe for clientelist populism.

We must prevent aspects of parliamentarism from being smuggled in through the windows.

It would not be good if Chile ended up with a mixed and insipid system.

Chilean tradition and culture are firmly in the field of presidentialism.

It has had excesses that must be improved, but that does not mean that it is necessary to migrate to parliamentarism.

40% chance of recession

Q.

How do you see President Boric in his second year of government?

R.

I see that the president has matured and has calmed down.

He has grown.

Unfortunately his coalition is not with him.

If a Martian landed in Chile and observed the behavior of the Broad Front and the Communist Party, he would conclude that they are opposition parties.

Q.

Could the deterioration of the economic figures have a

on the Government in this election?

R.

I think they are going to be punished for a multitude of factors.

The economy is one of them.

But also because of pardons, identity politics, insecurity and immigration policy.

Q.

Economic activity in Chile fell 2.1% in March.

What is your vision in the face of this drop?

R.

You have to look at the data in detail.

The non-mining product is being resilient.

The question is if this is going to be maintained, if the resistance is going to turn into

.

I give it a 40% chance that we will have a recession.

The fact that the Federal Reserve is coming to the end of its restrictive cycle can help us.

Q.

The 8.5% drop in mining activity was what affected the most.

Is it a worrying factor?

R.

In mining there is a serious problem with water and permits.

It is surprising that there have been relatively few desalination initiatives;

That is the solution that has been sought in many countries.

Regarding the permits, the fact that the expansion of Los Bronces has finally been approved is a good sign, but it is not clear if it is a change in trend or just an isolated decision.

Q.

In a scenario with high inflation, negative growth and rising unemployment, what should the Central Bank do?

R.

You must prioritize the fight against inflation.

If the inflation breaks out, it's as if the toothpaste came out of the tube.

Very difficult to return it.

Q.

Could you make the decision to start lowering the interest rate earlier than budgeted?

R.

It will depend on how the data comes from.

At this moment I see it difficult.

In the United States, inflation has turned out to be more rebellious than expected.

It is possible that the rate will not continue to rise, but I think it will take a while until it starts to come down.

Q.

You are one of the few economists who anticipated that artificial intelligence would begin to replace jobs en masse.

Do you think there is some of that effect in the increase in unemployment (8.8% between January-March) in Chile?

A.

When, many years ago, I sounded the alarm about artificial intelligence, they called me crazy.

Someone even asked if he was smoking marijuana.

Today the issue is real and progresses every day.

Some jobs will be lost and others will be created.

The important thing is to understand that in the future the winning teams will be made up of a combination of artificial intelligence and human intelligence.

It will be that mix that will triumph over isolated computers or lonely people.

This means that education must move in that direction, learn to build teams with artificial intelligence.

Unfortunately, none of that is being done.

Education in Chile, and in the rest of Latin America, continues to be a horror.

It is an area in which we are going backwards.