Gemines report number 510 corresponding to March 2023 indicates that after last year’s “twin surpluses” (effective and structural) and the notable adjustment in spending that allowed it to return to its pre-pandemic trend, “the accounts Prosecutors restart this year a tortuous and always failed path of converging to balances that are ideally sustainable and sustained over time”.
According to the consultancy, this is due to the recent rejection of the tax increase proposal by the government of President Gabriel Boric, which “casts a note of doubt on the prospects for convergence of fiscal accounts.” However, according to Gemines, “there is enough time to reach agreements and for several of the government’s objectives to be met.”
The analysis indicates that it could also be said that the rejection of the idea of legislating the tax reform by the Chamber of Deputies opens a new, more auspicious path for what should be a project that is more “limited” in its collection claims and more pro -market in its design, in order to garner broad support from the political spectrum. Let us remember that to re-enter the project, through the Senate, an approval of 2/3 of said instance is required.
For Gemines, it could also be speculated that the precedent left by the parliamentary rejection is a kind of call for attention in what will be the processing of the pension reform. The consultancy linked to Alejandro Fernández Beroš and Tomás Izquierdo Silva affirms that “the Government will be forced to seek broad agreements if it wishes to advance in the processing of this reform, which means a real openness to making relevant changes in the issues in which it does not He has the support of the opposition.
As Gemines has expressed in previous reports, the current government, far from being able to advance its re-founding program, has gradually transformed into an “administration” government, understood as a government that has been captured by emergencies. Thus, they maintain: “the focus is on issues such as crime, the migratory crisis, violence in the southern macro-zone, and obviously, on the most relevant projects: Tax and Pension Reform.” They warn that even the eventual health reform is being postponed to some extent.
Change of cabinet and search for agreements
Gemines points out that with the recent ministerial and sub-secretary changes, they sought authorities with more knowledge in the operation of the State, older and more experienced, with greater political and management capacity and, in general, with more centrist political positions. This, moreover, they add, “has been largely a response to the preferences of the population, since in the various opinion polls, the best evaluation of the authorities is observed in those that coincide with the profile described above. “.
In short, for the consultant, the political reality, in the fact that the Government does not have a clear majority in the Chamber of Deputies and even less in the Senate, “is installed as an evident restriction on the possibilities that the government advance in its reform agenda, unless it is willing to modify them in a substantive way, in order to seek broad consensus”. This, moreover, according to Gemines, has been installed with more force after the constitutional plebiscite last September, since the broad triumph of the rejection was read by the political world as a vote of support for more conservative and/or less refoundational.
Regarding the medium-term prospects, Gemines continues to anticipate a rather complex scenario from the perspective of making the fiscal accounts converge towards equilibrium, and this is independent of the rejection of the idea of legislating the government’s tax reform, which faced many obstacles and which will be completely redefined according to the proposals of the Minister of Finance.
Having said the above, they conclude, “confidence in compliance with the convergence towards fiscal balance, something that has been repeatedly breached in the past, will depend fundamentally on reaching an agreement to increase tax collection.”
Check the Gemines 510 report here.