Boric faces another tax reform reckoning in Chile

When he took office last year, Chilean President Gabriel Boric faced several distinct challenges. Chief among them was taking on systemic inequality without undermining economic growth or investor confidence as Chile emerged from the pandemic.

The task is a difficult one. Chile is historically seen as an economic success story within Latin America owing to its average of over 4 percent growth each year since democratizing in 1990. However, as the massive protests of 2019-2020 demonstrated, the fruits of these gains are far from equitably distributed, leading to widespread dissatisfaction among many sectors of the population.

Enter Mr. Boric, who campaigned primarily on addressing this inequity but must now convince the country’s Congress to follow up on his policy priority. The 37-year-old president unveiled a USD 8 billion so-called “fiscal pact” earlier this month that will raise taxes and boost social services. 

Legislative talks are to begin soon regarding the pact, which is expected to include spending at roughly 2.7 percent of gross domestic product (GDP), with nearly half of this going to increasing monthly pensions from USD 246 to USD 300 per month.

A third of the proposed spending (0.9 percent of GDP) is dedicated to health measures such as reducing wait times...