A little over half a year has passed since Chile's Kast right-wing government was inaugurated on March 11. Although it is working on restoring public order and economic reconstruction, the path ahead is fraught with difficulties. How it will handle its biggest diplomatic challenge, foreign policy toward China, is likely to affect domestic politics as well.

Struggles in Parliamentary Management

President Kast has promised since the start of his administration that restoring public order, revitalizing the economy, and institutional reform would be his three priority issues.

In recent years, public order in Chile has deteriorated due to a massive influx of undocumented immigrants from Venezuela and other countries, as well as a sharp increase in violent crimes. President Kast has strengthened measures against undocumented immigrants and has begun construction of a "wall" on the northern border. However, regarding constitutional amendments to strengthen security measures, opposition has emerged not only from the opposition but also from the ruling party and other right-wing parties, so it remains uncertain whether it will proceed smoothly.

On the economic front, he succeeded in passing an economic reform bill in parliament, the core of which is to lower the corporate tax rate from the current 27% to 23%. However, due to opposition from the opposition parties, among other factors, swift implementation seems unlikely.

Parliamentary measures are also not easy. Since the ruling party of the Kast administration does not hold a majority on its own, it is struggling to coordinate with other right-wing and centrist parties.

Rising Unemployment and Inflation Also a Cause for Concern

What concerns the Kast administration is the noticeable trend of economic deceleration. According to an announcement by the Central Bank of Chile in early September, the real growth rate of this year's Gross Domestic Product (GDP) is estimated to be between 0.25% and 0.75%. This represents a significant downward revision compared to the 1.0%-1.75% forecast in the Central Bank of Chile's June announcement. This is likely due to sluggish domestic demand, combined with declining mining production and the negative economic impact of heavy rains.

Furthermore, concerns are growing over the deteriorating employment situation. According to Chile's National Institute of Statistics (INE), the unemployment rate for March-May this year reached its highest level since 2021. The inflation rate, which had soared due to rising fuel prices caused by turmoil in the Middle East, had shown signs of decelerating temporarily but is accelerating again. According to INE's announcement in early September, it was 4.1% year-on-year, exceeding the Central Bank of Chile's inflation target of 3%.

Expectations for a Visit to China in November - President Kast

The relationship with China is pointed out as a factor that could influence such a difficult domestic political situation. It's no surprise, as China is Chile's largest trading partner, and trade with China now accounts for over 40% of Chile's total trade value. China's presence is significant in various aspects of the Chilean economy. Chile has strong economic ties with China to begin with.

In 2012, Chile and China signed a "Strategic Partnership" agreement, which was upgraded to a "Comprehensive Strategic Partnership" in 2016. In 2019, Chile decided to join China's Belt and Road Initiative (BRI), a broad economic zone concept, and also participates in the China-led Asian Infrastructure Investment Bank (AIIB). Chile boasts the world's largest lithium reserves, and Chinese companies have acquired 25% of the shares in Chilean lithium companies. China is almost always heavily involved in Chile's key infrastructure, such as the power sector, highways, and subways.

A prominent local analyst emphasizes, "China is now an indispensable presence for the Chilean economy." In August, Chilean Foreign Minister Pérez was dispatched to China, where he reportedly met with Foreign Minister Wang Yi (member of the Politburo of the CPC Central Committee) and others, confirming further strengthening of relations with China and discussing new economic cooperation. President Kast's visit to China is also scheduled for November. It is certain that continued further economic assistance from China would be a significant positive for Chile's domestic politics.

Pro-U.S. Stance, Yet China Relations Cannot Be Ignored - Kast Administration

On the other hand, President Kast is said to have a high affinity with U.S. President Trump, to the extent that he is nicknamed "Chile's Trump," due to their similar political style and rhetoric. It is well known that the Trump administration is highly sensitive to China's growing influence in Latin America. Recently, it formed a political alliance called "Shield of the Americas" to combat drug organizations, encouraging the participation of right-wing governments in Latin America.

According to experts on Latin America, while this is nominally an "anti-drug organization measure," another important goal is to exclude China's influence. Chile's Kast administration has also expressed its intention to participate in this alliance. There is a strong view that the Trump administration aims to prevent Chile from further rapprochement with China. Even if the Kast administration leans pro-U.S. in foreign policy, it will inevitably have to prioritize its relationship with China when considering its domestic economy. What will be the outcome of the scheduled meeting between President Kast and President Xi Jinping in November? Depending on the outcome, it could affect not only bilateral relations but also the entire Latin American region.

■筆者プロフィール：山崎真二

山形大客員教授（元教授）、時事総合研究所客員研究員、元時事通信社外信部長、リマ（ペルー）特派員、ニューデリー支局長、ニューヨーク支局長。