SANTIAGO, Chile — Chile’s legislature took a major step Tuesday toward enacting a wide-ranging tax and economic reform package championed by President José Antonio Kast, handing the conservative leader a significant win in his push to reinvigorate one of Latin America’s most prosperous economies.
The vote comes at a critical time for Kast, who has been in office for just over three months and is facing the challenge of turning around a struggling economy. Chile’s economy contracted by 0.5% during the first quarter of 2026, following a stretch of weak performance. Joblessness climbed to 9.4% between March and May — the highest it has been since June 2021.
The reform package is designed to breathe new life into Chile’s private sector, create jobs, and eliminate the country’s budget deficit. Among its key provisions: a gradual reduction of the corporate tax rate for large businesses from 27% down to 23%, an exemption for newly constructed homes from the national value-added tax, restrictions on which new universities can participate in Chile’s free tuition program, and new rights for private companies to seek compensation when environmental disputes hold up investment projects.
The bill had passed the Senate last week, but senators made modifications to certain sections, requiring the lower chamber to hold a final vote. On Tuesday, lawmakers signed off on nearly every change — all except one provision concerning how local municipalities would be compensated for tax reductions. That remaining issue must be resolved before the legislation officially becomes law.
Kast expressed optimism following the vote on what his administration considers its defining economic initiative.
“I hope all political sectors will work together so the remaining issue can be resolved quickly,” he told reporters while visiting the northern city of Copiapó, where he was monitoring the government’s response to severe storms in the area.
Kast, who is 60 years old, entered office in March with a platform centered on fighting crime, curbing illegal immigration, trimming government spending, and growing private sector revenues. Political observers have noted that his election represented Chile’s most pronounced shift to the right since the country’s military dictatorship ended in 1990.
“The president’s efforts have essentially been focused on deepening and returning to the orthodox neoliberal model of the late 1970s and early 1980s,” said political analyst Gilberto Aranda. “What existed before was neoliberalism tempered by subsidies and other measures.”
Finance Minister Jorge Quiroz praised the outcome, saying the reform would give investors more confidence, cut through bureaucratic red tape for investment projects, and make Chile’s tax structure more competitive internationally.
“We are enormously satisfied,” Quiroz said following the vote.
Lawmakers from the opposition have pushed back against the legislation, arguing it disproportionately benefits large corporations and wealthy Chileans. They have announced plans to challenge the law in Chile’s Constitutional Court.
“It has become clear that all of José Antonio Kast’s talk about security, jobs and immigration was simply a Trojan horse to advance the project he truly cares about: cutting taxes for the richest Chileans,” said Constanza Martínez, president of the left-wing Broad Front coalition.
