SANTIAGO (Reuters) -Jose Antonio Kast's far-right Republican Party made strong gains in both chambers of Congress following Chile's Sunday presidential election, but fell short of majorities and will need to forge alliances to pass reforms.
Most of the gains came at the expense of Chile's traditional right-wing bloc. The anti-establishment People's Party, led by TV commentator Franco Parisi, went from one seat to 14 in the lower house, becoming its fourth-largest as voters soured on traditional parties.
"Chile's traditional parties are in crisis," said Guillermo Holzmann, a political analyst from the University of Valparaiso. "Their votes have dropped and new leaders have emerged, like Parisi, like Kast."
Kast is favored to beat front-runner Jeannette Jara, the leftist government's coalition candidate from the Communist Party, in a runoff on December 14 after no candidate reached the majority needed to win the race on Sunday.
The congressional makeup could moderate Kast's most extreme proposals, Patricio Navia, a professor of political science at New York University, said.
"The Senate's tied and nobody really has a majority in the lower chamber," Navia said, noting that the People's Party, which he described as "capitalist and populist," will be the key swing vote.
Parisi placed a surprise third with nearly 20% of the vote, beating out other poll-leading right-wing candidates. Parisi has said he's signing "no blank checks" and expects both runoff candidates to vie for his support.
"You negotiate with Parisi, you don't converse," Holzmann said, adding that he has become a fundamental political force. "It's an element that the new president is going to have to face."
Despite that, Navia sees the new congress's makeup as a moderating force regardless of who succeeds in December. Jara, the current labor minister, has led polls after winning a primary in June to represent the governing leftist coalition.
She ran on her accomplishments in pushing through popular policies, like pension reform, a reduced work week and increasing the minimum wage.
Jara also represents the Unity for Chile coalition, a bloc of left-leaning parties, which lost 8 seats in the lower house and one in the senate.
"I think it's good news because Chileans voted for two extreme candidates in the runoff, but they voted for a Congress that's going to be controlled by moderates," Navia said, adding that Kast could struggle to pass more radical right-wing reforms.
That could mean an easier path for proposals like cutting corporate taxes and regulations and even slashing some forms of public spending, but he may face a harder time winning support for plans to deploy the military to police crime around the country and expel undocumented migrants.
Jorge Selaive, chief economist at Scotiabank Chile, said on X that the congressional results were good for markets.
"The composition of both chambers will make consensus necessary," Selaive said, adding that it's "an overall result that isn't bad for democracy."
The outcome of Sunday's vote lifted the peso by a 0.7% gain on Monday and looked to bolster local stocks and bonds.
In an analyst note, Morgan Stanley said the result falls close to a bull case scenario and expects some of the People's Party deputies will "support some of the growth policies proposed by Kast."
(Reporting by Alexander Villegas; additional reporting by Reuters TV; Editing by Christian Plumb)
