• Matheus Zani

🌎 Chile scraped Pinochet-era constitution | Bitter-Chocolate |China's military power

Updated: Nov 24, 2020

October 30th, 2020

Happy Friday!

As Covid cases rise across Europe and lockdowns start to take effect, could we see yet more fiscal stimulus in December? That's at least What the European Central Bank hinted at on Thursday… little tease!... Bring out the money printer!

Did You Know...

The first coin ever minted featured a roaring lion and was introduced in 600BC.

Do you know who is credited with creating currency?

(Answer below)

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A historic decision in Chile

On July 17th, we wrote in #3things that Chileans were in Santiago’s streets protesting against the Government, now, three months on they’re back in Plaza Italia in central Santiago, but this time to celebrate the overwhelming vote to replace their Pinochet-era constitution.

On Sunday, almost 80% of the electorate voted in favor of rewriting the constitution, a document dating back to the gloomy days of the Pinochet dictatorship, which ended in 1990.

Center-right President Sebastian Piñera pledged the referendum in a bid to quell mass protests that broke out in 2019 against the country's neoliberal economic policies. But, somehow, the latest demonstrations that were driven by the impact of Covid-19 on the economy, helped, reinforced, and sped up the desire of the Chilean people.

What's wrong with the current constitution?

Quite a lot, according to 80% of the population. They argue that it lacks fundamental social rights, mainly for Indigenous peoples, which make up 10% of the population; according to the 2012 census, 2,000,000 people declare having indigenous origins. It was also created to limit state intervention and privatized the social welfare system.

As a result, Chile suffers from poorly funded public health and education systems, elevated costs of living, appallingly low pensions, as well as high levels of private debt.

We've looked at the Gini index, the most widely used international measure of inequality - for which the higher the number, the greater the inequality. This shows Chile ranks as one of the most unequal countries among a group of 30 of the world's wealthiest nations.

Although the referendum is a major victory for Chile's grassroots civil society and, of course, for democracy, this will not change such inequality overnight. The profound reforms demanded by Chileans can only be achieved “poco a poco”. They will require more than simply adopting a new constitution and new laws. The key is whether politics will have the determination to go through this fundamental change.

FX |

USD/CLP exhibits high volatility (more than 19% annual) over a year. However, the CLP is the strongest currency across LATAM, depreciating just 6% (YoY) against the greenback.

First Look

Waiting for November? What will happen to the US Dollar after Nov.3?

In this article, we lay on the most recent data for October to understand how the American economy will enter into November. A month that is likely to continue to be filled with uncertainty about the development of the spread of Covid-19, as well as one of the main uncertainties to be clarified, who will be the next president of the largest global economy.

The outcome of the US election may have several new implications for US fiscal stimulus, taxation, public investment, and regulation. And in this way, it could bring about a change in the direction of the USD.

Read More Here


Ivory Coast's bitter election

Known as the main supplier of the world’s favorite - cocoa. The Ivory Coast is responsible (together with its close neighbor Ghana) for two-thirds of the world’s production and also self-titled as a shining example for West Africa and beyond.

Oh…and it's one day to the national election.

There might be a new election, but it is the same old story. Ivorians must again vote for one of the three giants of politics: Alassane Ouattara, 78, Laurent Gbagbo, 75, and Henri Konan Bédié, 86 - a group rarely described as spring chickens. Nevertheless, these three have successfully monopolized political life in Ivory Coast for over a quarter of a century, led the nation’s civil wars and coups, and almost derailed the whole country.

The last national election occurred in 2010 amid a bloodbath, where thousands were killed in the aftermath when then-president Laurent Gbabgo refused to concede defeat to Ouattara. Now, the story is pretty similar, with Ouattara seeking a third term, which is unconstitutional and sadly leading the country to another bloodbath. At least 20 people have reportedly been killed in inter-communal clashes and violent confrontations between Ivorian security forces and opposition protesters even before the result.

The economy under Outtara’s administration

President Ouattara is campaigning on his economic record, which genuinely encompasses some impressive growth numbers - the country is an agricultural powerhouse and has had an average yearly growth of 8% since 2011. Cocoa is vital to the economy - around 600,000 farmers work in the sector, which accounts for about 40% of export revenues and our ever-expanding waistlines.

According to the World Bank, growth remained strong at 6.9% in 2019, supported by private investment and services. Since early 2020, the Covid-19 pandemic has negatively affected economic performance through disruptions in trade and production capacity, as well as reduced foreign financing flows.

The outlook for the country is not so bright and filled with risks and challenges for whichever president is sworn in on the 31st of October. From Covid-19’s second wave to a decline in cocoa prices, both of which will also squeeze fiscal revenues and economic growth.

FX |

Ivory Coast’s monetary and exchange rate policies are managed by the Central Bank of West African States (BCEAO), which maintains a fixed peg between the CFA Franc and the Euro.


The Chinese military headache for the next US president

With the US presidential election only a hop, skip and jump away the challenges the next POTUS will face having been brought into the microscope. Although it's no secret, whichever candidate seals a four-year term at the White House will have their hands full with domestic issues, there is a little spoken about the challenge rearing its head on the other side of the globe.

In a 2018 report by the Pentagon, China, along with Russia, was named as posing the most significant military challenge to the US… I hardly feel you need to be a rocket scientist to deduce this.

In any case, Beijing's program of rapid military modernization has seen its military quickly grow into a global power. This year alone Chinese troops engaged in a deadly border clash with Indian troops, Army aircraft were buzzed by Japanese and Taiwanese air defenses and Chinese ships have been flexing their arms in the disputed waters of the South China Sea.

The main concerns the next president will need to consider are:


The small self-governing island has been on the Chinese wishlist for some time and President Xi Jinping has never hidden his desire to “reunify” the island with the mainland, whilst never ruling out doing so by force. If China decided that they wanted to act on this ambition, it would put the US in a difficult situation. During the Trump Administration, the US has shown its support of keeping Taiwan a separate nation and has included visits by high-level US government officials and the sale of high-end weapons.

With the increased activity of the US military around Taiwan and the increased violation of Taiwan’s airspace by Chinese aircrafts - the possibility for misunderstandings between the two military powers will increase substantially.

South China Sea

Beijing claims the vast majority of the South China Sea as sovereign territory and has stepped up its efforts to secure its dominance over the waters in recent years. However, six other governments have overlapping territorial claims in the contested waterway. Earlier this year the US sailed two aircraft carriers in the South China Sea at the same time, whilst US bombers and reconnaissance planes flew out from Japan or Guam. This sent a clear message to Beijing of the commitment the US has to its allies and also that the sea was being thoroughly monitored.

Key Allies

Trump’s administration has had a somewhat rocky relationship with South Korea and Japan when dealing with the military budget. As these relationships have been strained, China will be keeping a close eye on how this develops.

Thousands of South Koreans were furloughed at US bases while Washington and Seoul haggled over how much South Korea should be paying for a US military presence in the country.

Relations with Japan have been slightly better, as Tokyo increased its military budget by 8.3%. However, analysts have argued that this has come from Trump’s pressure.

Both scenarios are twisting the arm of allies to spend more money on US troops and less money on military upgrades.

Whatever happens in the upcoming election, Trump or Biden will be keeping a close eye on the developments in Asia and will see Asia as the forefront of their defense planning.


Speculative bets that Joe Biden will win the U.S Election on Nov. 3 and bring a steadier tone to the Sino-U.S. relations have boosted the strongest yuan rally in years, and Chinese authorities have started pushing back.

In Other News

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Quiz of the week


King Alyattes is credited with the first known currency which was created in Lydia, now part of Turkey in 600BC. Coins later evolved into banknotes around 1661AD

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