Kast’s First 90 Days: Key Initiatives to Launch His Government in Chile

Original article: Los primeros 90 días de Kast: las medidas con que echará a andar su gobierno

At noon on March 11, José Kast will take the presidency of Chile, bringing with him a well-defined set of initiatives for the first three months of his administration. This roadmap aims not only to streamline the start of the new government but also to introduce from day one an agenda focused on fiscal adjustments, tax cuts, and deregulation.

The initial agenda includes public spending cuts, tax reforms, regulatory flexibility to unblock investment projects, and changes in the operations of the state apparatus. Many of these initiatives were part of the program that allowed Kast to reach La Moneda and underscore a clear political definition: reducing the size of the state, expanding the operational space for the private sector, and alleviating the tax burden on businesses.

Kast’s 90-day plan combines legislative proposals that will need congressional approval with administrative decisions that the executive can push through decrees or internal directives. The new government’s aim is to move many of these pieces quickly, not only to showcase its capacity for action but also to begin consolidating a shift in critical areas such as public spending, investment, state employment, and labor regulation.

Although many proposals focus on economic aspects, the package also encompasses public employment changes, investment regulations, and labor market operations. Together, these measures signal not only the start of an administration but anticipate a change in direction: less state involvement, more room for the market, and a renewed agenda that prioritizes the interests of major businesses.

Here is a guide to understanding some of the key measures that Kast intends to implement during his first three months in office.

1. Public Spending Cuts: The Most Controversial Promise of the Start

The new government’s first major signal points to fiscal adjustment. Kast’s team has defended a target of US$6 billion in cuts to public spending over 18 months, a figure that became one of the most debated points during his presidential campaign. The most frequent criticism was that the team did not clearly specify which items would face such a significant adjustment, given that a large portion of the budget is committed to legal obligations and social policies.

As a concrete initial signal, the incoming Minister of Finance, Jorge Quiroz, has requested new ministers to implement a transversal reduction of 3% in the resources of each portfolio, indicating that the cuts will begin to be felt at the start of the administration. Later, Kast’s team has also suggested cuts in politically appointed positions and what they refer to as «political spending.»

However, a reduction of this magnitude has not gone unnoticed. Throughout the campaign, both the government and various economists warned that without a clear breakdown, such a target could end up impacting social benefits or public services. Even voices from within the right have questioned whether it is feasible to carry out such rapid cuts without incurring high political and administrative costs.

While the new government has suggested that the adjustment will principally target «political spending,» a transversal cut of this size raises questions about its real impact. In practice, budget cuts may end up affecting programs, public services, or state investments if it is not clearly specified where the savings will come from.

2. Reduction of Corporate Taxes

Another project that the new government plans to send to Congress in the coming months involves a reduction of the first-category tax.

The proposal suggests lowering the tax rate on businesses from the current 27% to 23%. Kast’s team argues that this measure aims to stimulate private investment and strengthen the competitiveness of the Chilean economy.

This change is part of a broader tax agenda aimed at stimulating economic activity through incentives for the business sector.

The reduction in corporate tax is defended by the new government as an incentive for investment. However, it also entails lower fiscal revenues in the short term, which makes the discussion about how to fund public policies and state services in a scenario of decreased revenue inevitable.

3. Tax Incentives for Formal Employment

Concurrently, the economic program also includes tax incentives for companies that hire workers currently employed informally.

The proposal considers a tax credit mechanism associated with salary payments that include social security contributions. With this, the incoming government seeks to incentivize labor formalization and increase the number of workers contributing to the social security system.

Labor informality remains one of the challenges in Chile’s labor market, particularly in certain productive sectors and lower-income occupations.

While the incentive aims to increase employment formalization, some experts warn that such tax benefits do not always guarantee new hires. In some cases, businesses might access the benefits for jobs they would have created regardless.

4. Preferential Rate for Small and Medium Enterprises

Within the same tax package, the program plans to establish a reduced fixed rate for small and medium enterprises (SMEs).

According to economic team sources, SMEs could have access to a rate close to 12.5%, which would imply a lower tax burden for this productive sector.

The new government argues that small businesses face greater difficulties in financing their growth and generating jobs; thus, a reduction in their tax burden could facilitate their development.

Tax relief for SMEs is often positively received in economic discussions. However, some analysts suggest that the main issues for these businesses are not always tax-related but concerning access to financing, labor costs, and challenges in competing in highly concentrated markets.

5. Gradual Elimination of Property Taxes on Primary Residences

Another initiative that the new government intends to promote in the early months focuses on gradually eliminating property tax payments for primary residences.

The proposal would start with exemptions for individuals over 65 years of age and later move towards eliminating the tax for the primary residence, depending on fiscal conditions.

Kast’s team has argued that the idea is to reduce maintenance costs associated with owning a home, especially for families that have already paid taxes at the time of acquisition.

The elimination of property taxes on primary residences has been a recurrent proposal in political debates. However, this tax represents a significant source of municipal financing; thus, its potential elimination raises discussions about how to compensate for those resources at the municipal level.

6. Elimination of Capital Gains Tax

Among the projects the new government plans to present is the elimination of the capital gains tax on the sale of low-market presence stocks.

This measure aims to encourage the development of capital markets and facilitate investment in companies with lower stock market presence.

Moreover, the program plans to move towards reintegrating the tax system, a topic that has been part of the Chilean fiscal debate in recent years.

The elimination of this tax seeks to boost capital market dynamism. However, some economists caution that such measures tend to primarily benefit investors with greater capacity to participate in these markets, reopening the discussion around tax equity.

7. Special Statute for Large Investments

The 90-day plan also includes creating a special statute intended for large-scale investment projects.

This instrument aims to provide greater legal and tax certainty to companies making significant investments in the country, especially those involving technology transfer or human capital development.

The goal is to position Chile as an attractive destination for long-term investment projects.

Legal stability mechanisms for large investments are utilized in various countries to attract foreign capital. However, they also generate debate about whether these regimes end up granting more favorable tax or regulatory conditions to large companies than to the rest of the economy.

8. Changes to Accelerate Investment Permits

Another focus of the program aims to reduce the processing times for projects through administrative changes in various government agencies.

Measures contemplated include adjustments in environmental regulations, modifications in land use regulations, and reviews of procedures related to the environmental evaluation system.

The economic team’s diagnosis is that state bureaucracy can delay investment projects; thus, efforts are being made to simplify some administrative processes.

Reducing processing times for projects is often presented as a way to improve state efficiency. However, environmental and community organizations have warned that simplifying regulatory processes can create tensions with environmental protection standards or with community participation in decisions affecting their territories.

9. Changes at the Labor Directorate

In labor matters, the program includes modifications to the functioning of the Labor Directorate through administrative decrees.

The goal, according to Kast’s team’s diagnosis, is to avoid administrative interpretations that could generate uncertainty in the application of labor regulations.

Simultaneously, the incoming government plans to advance the digitalization of processes within the Ministry of Labor and simplify various procedures.

Changes in the functioning of the Labor Directorate aim to provide greater legal certainty in applying labor norms. However, union sectors have warned that limiting the interpretative role of the agency could reduce protections for workers in labor disputes.

10. Adjustments in Public Employment

Finally, the new government has indicated that it will review the public employment system.

Among the mentioned measures is the reduction of positions associated with political appointments and the strengthening of the merit-based career structure.

These decisions are part of a broader strategy aimed at reorganizing the functioning of the state apparatus.

The review of public employment has been a recurring banner in various administrations. The challenge often lies in distinguishing between politically appointed trust positions and permanent technical functions of the state, avoiding that personnel reduction processes negatively impact the continuity of public services.

A Start That Will Shape the New Government’s Course

The decisions made during the first months of a government typically set the tone for the entire administration. In the case of the new government, the package of measures planned for Kast’s first 90 days aims to quickly signal various fronts.

From controlling public spending to tax and regulatory changes, the proposed initiatives seek to outline the direction the new administration will take in economic matters and state management.

Starting March 11, with Kast installed in La Moneda, this will also begin the phase during which these proposals must progress towards implementation. In the coming months, it will be seen how these measures manage to transform into concrete reforms and what effects they will have in the new political landscape that is beginning to unfold in the country.