Chilean Senate Approves Economic Reforms

The Chilean Senate has approved a package of economic and tax reforms proposed by President José Antonio Kast’s administration. The government hopes these reforms will stimulate the economy and attract new investments.

The Senate vote took place after a lengthy debate that lasted 12 hours, ending close to 3 a.m. due to disagreements among lawmakers. Today is an important day for Chile, said Finance Minister Jorge Quiroz following the vote. Chile needs to grow, and this project makes it possible.

While the administration views the project as a tool to attract investments, create jobs, and revive an economy that struggled to recover from the COVID-19 pandemic, the opposition argues it benefits the wealthy and criticizes the relaxation of tax and environmental regulations, which could hinder the country’s development.

The debate occurs amid Chile’s economic stagnation, with the GDP falling by 0.5% in the first quarter and several consecutive months of negative economic activity. The unemployment rate reached 9.4% from March to May, the highest since June 2021.

President Kast, a conservative lawyer who took office in March, promised to implement an emergency government to repair Chile’s battered economy. His presidency represents a rightward shift since the military dictatorship (1973-1990), advocating for neoliberal economic policies that reduce state involvement and grant greater autonomy to private initiatives.

Analyst Gilberto Aranda commented, Previously, neoliberalism was corrected with subsidies and other elements. Now, efforts are focused on a return to the orthodox neoliberal model from the late 1970s and early 1980s.

One of the key debates was about exemptions and compensations for companies whose projects are rejected on environmental grounds. The Senate approved a gradual tax reduction for large companies, lowering the rate from 27% to 23% by 2029. Additionally, companies with revoked projects due to environmental issues will receive a reimbursement of expenses, sparking criticism from opposition senators who plan to challenge the measure in the Constitutional Court.

The right has enacted a tax amnesty, stated Senator Yasna Provoste of the Christian Democratic Party.

The approved measures also include a new tax regime for investments and exemption from contributions for senior citizens owning their first home.

Despite Senate approval, the bill returns to the Chamber of Deputies, which had initially approved it at the end of May. Changes, such as the inclusion of the financial right-to-forget rule, which requires financial records to erase expired debts after five years, need further review by the Chamber.

The lower house will scrutinize all modifications introduced by the Senate. This stage is anticipated to be complex due to the close vote on Thursday. If any changes are rejected, the process could be delayed further, potentially forming a bicameral committee to resolve the disagreements.