Violent clashes broke out in the Chilean port city of Valparaíso on Monday as President José Antonio Kast delivered his first annual State of the Nation address to the National Congress, with labour unions and student groups taking to the streets to protest his government's sweeping cuts to social programmes. Demonstrators accused the administration of dismantling public healthcare, education, and social rights, and clashed with police outside the legislature as the speech unfolded inside.

In a two-and-a-half-hour address, Kast — a far-right politician who took office earlier this year — framed the spending cuts as an economic necessity, arguing that his government had inherited a country with its finances in disarray. He announced that the structural fiscal deficit stands at 3.6% of GDP, more than double the 1.6% committed to by the outgoing leftist administration of Gabriel Boric (2022–2026), and described the situation as an "economic emergency." "We inherited a country with the accounts in disarray, and our obligation is not to complain, but to order them," Kast told lawmakers. Finance Minister Jorge Quiroz added that the previous government's budgetary reports contained "errors" and "inconsistencies," alleging that gross public debt for the 2026–2030 period had been underestimated by around USD 10.5 billion. Legislators aligned with Kast subsequently announced a constitutional accusation against former Finance Minister Nicolás Grau.

The economic backdrop is stark. Chilean economic activity contracted by 1.2% in April compared to a year earlier — the sharpest drop in three years — while the national unemployment rate reached 9.1% in the February–April quarter, the highest since the pandemic period of June 2021. Female unemployment stands at 10.5%, and the overall rate has remained above 8% for forty consecutive months. Kast defended the spending reductions carried out during his first 82 days in office as "measures of containment and efficiency" that have generated savings of more than 1.3 trillion Chilean pesos, roughly USD 1.46 billion, as part of a broader USD 6 billion fiscal adjustment planned over eighteen months.

Why this matters: Chile, a South American nation of around 19 million people, has experienced recurring waves of social unrest since mass protests over inequality erupted in 2019. Kast's fiscal retrenchment puts him on a direct collision course with unions and social movements that regard expanded public services as hard-won gains. His request for congressional support on a far-reaching tax reform, which begins its Senate passage on Tuesday, will be an early test of whether his government can build the political coalition needed to make its economic programme viable while managing growing public discontent.