Markets and the economy do not always tell the same story. In Chile, they are telling opposite ones.
The IPSA stock index hit an all-time high in late January as Kast laid out his economic plan. The growth gauge went the other way and printed a contraction the very next month.
Kast won the December runoff with 58% of the vote. Five weeks after taking office, he sent Congress a sweeping reform plan with 40-plus measures.
The headline asks are big. Kast wants to cut the corporate tax rate from 27% to 23% and hand small businesses a $1.4 billion annual payroll credit.
He also wants to bring back a 25-year tax invariability deal for big projects. That cuts a major source of risk for foreign investors.
The plan reopens a 12-month window to bring offshore Chilean cash home at a flat 7% rate. Markets read that as a clear pro-capital signal.
Markets bought the pitch. The IPSA hit an all-time high of 11,721 on January 28 - the day of Kast's inauguration address - while the peso firmed about 9% from its 2025 average against the dollar before easing back.
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The Central Bank of Chile's February activity gauge showed a month-on-month contraction. The bank narrowed its 2026 growth range to 1.5%-2.5% in its March policy report.
The IMF then cut its own 2026 Chile forecast to 2.2%. That is about half of Kast's stated 4% growth target.
Kast's approval rating slipped to 47% after a fuel-price decree. That weakens his hand heading into a tax fight.
There is also a coalition math problem. Kast's group controls neither chamber of Congress, with the Senate tied and a minority in the Chamber of Deputies.
Every big piece of his plan needs help from moderate opposition lawmakers. None of them have shown up yet.
Copper still drives the economy. The metal accounts for about half of Chile's exports and around 10% of GDP, and state producer Codelco just pushed its peak production timeline from 2027 to 2034.
Public debt has climbed from 28% of GDP before 2019 to 42.7% in 2025. That narrows the buffer to Chile's 45% fiscal rule ceiling.
Kast has promised $6 billion in spending cuts within 18 months without sharing the math yet.
Inflation has at least come down. The headline rate hit 2.4% in February, the first reading below 3% since early 2021, which gave the central bank room to hold rates at 4.5%.
For investors, the read is mixed. Reform momentum and a strong stock market are real, but so is a sluggish economy and a Congress that can block almost anything big.
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