Chile Conservative Kast Wants to Double Growth to Solve Social Ills
Chile Conservative Kast Wants to Double Growth to Solve Social Ills
(Bloomberg) -- Two years after a social uprising against inequality in Chile, the new rising star of the presidential race wants to reimpose order, slash taxes and refocus government efforts on growth, according to his top economic adviser.
By reducing corporate and sales taxes, cutting red tape and reducing legal uncertainties for investors, Jose Antonio Kast aims to return the economy to the halcyon days of the 1990s when expansion averaged 6.1% a year, Eduardo Guerrero said in an interview. Growth averaged 3.3% in the past decade.
It’s a risky policy in a country riven by social discontent, but one that has enabled Kast to overtake the center-right candidate in the polls and brought him level with left-winger Gabriel Boric. The first round of voting is on Nov 21. An admirer of Augusto Pinochet’s military regime and often likened to Brazil’s Jair Bolsonaro, Kast also advocates deeply conservative social values.
“We want to go back to having the same kind of growth rates that we had in the 1990s,” Guerrero said. “We want factors that depend on public policies to be very pro-investment.”
Kast’s call to grant a larger role for private industry puts him at odds with the other candidates who envision a bigger state as key to mitigating social unrest.
Tax Cuts
The son of German immigrants after World War II, Kast wants to slash the corporate tax rate to 17% from 27%, while reducing the sales tax to 17% from 19%. At the same time, he calls for gradually eliminating levies on patrimony, such as inheritance tax.
Even with those lower rates, faster economic growth will boost government income and free up resources for social spending, said Guerrero. The use of technologies such as blockchain will also make the public administration more efficient.
Improving people’s economic well-being will ease social tensions going forward, said Guerrero, 38. Uncertainty and slower growth have hurt confidence, delaying real-life decisions such as purchasing a home.
“There’s frustration among people that got used to a growing economy and improving quality of life,” he said. “But, from 2012 until now, real income has stagnated and economic growth was weak.”
‘Populist’ Policies
Guerrero, who holds one master’s degree in economics and another in tax policy, said “populist” proposals such as early pension withdrawals only add to the pain by spurring inflation. Lawmakers have approved three rounds of drawdowns since the start of the pandemic and are currently weighing a fourth.
“People are realizing that those bad public policies are affecting them,” he said. “Many who are in congress erroneously think that the people don’t understand those things. But, the population is living it first hand.”
One of Latin America’s richest nations, Chile will grow as much as 11.5% this year on billions of dollars in temporary stimulus during the pandemic. Growth will then hit a wall next year, slowing to about 2.5%, according to the central bank.
Kast’s Rise
A trained lawyer and father of nine children, Kast has spoken out against same-sex marriage, opposes abortion under all circumstances and is proposing the construction of a ditch on parts of Chile’s border to stem illegal immigration.
At the same time, Kast’s message of law and order has resonated with some voters who are fed up with years of violent protests, as well as an insurgency among indigenous groups that has prompted a state of emergency in parts of the south. On Oct. 18, demonstrations flared around the country at the second anniversary of the 2019 social unrest, leaving two dead and 450 arrested.
For Kast’s team, preventing a return to left-wing politics is a priority as Chile gears up for the election, according to Guerrero. If no one receives at least 50% of the first-round vote, a runoff will be held on Dec. 19.
“There’s a lot at stake,” he said.
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