Franco-American political scientist Rachel Théodore (Paris, 42 years old), an academic at the Center for Economics and Social Policies (CEAS) of Universidad Mayor, has been studying since 2023 the intense outflow of Chilean capital recorded after the social outbreak of 2019.
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After analyzing data and conducting dozens of interviews with entrepreneurs, tax lawyers, and former officials of the Ministry of Finance, the researcher concludes that there was a profound shift in the behavior and perceptions of entrepreneurs: from exhibiting a marked “local bias” — the preference for national assets — they moved to an increasing transnationalization of their investments, in a process that Théodore describes as a detachment from the Chilean nation-state. Today, despite the government of José Antonio Kast, the most economically liberal since the return to democracy, promising with its mega reform, approved by Congress, greater flexibility for entrepreneurs, the capital flight of Chilean investors has not stopped.
Question. Why does the capital outflow continue under the government of José Kast?
Answer. I have long thought that capital outflows would not cease under Kast’s government. Indeed, they did not return to previous levels but increased. The economic uncertainty index (IEC) from CLAPES UC shows something revealing in this regard: it peaked specifically at the start of Kast’s administration, attributed to the greater volume of problems at the beginning of this government. But the capital outflow continues because its cause was never only the political color of the government in power. Confusing this is the diagnostic error made by much of the Chilean public debate. If this were not the case, it would not be explained that the largest capital outflow in Chile’s recent history occurred under Sebastián Piñera’s government: 9.691 billion dollars in 2020, during the social outbreak and the pandemic.
Q. What was behind this?
A. The social outbreak of 2019, which triggered the first capital outflows, was not a passing crisis of confidence towards a specific government. It reminded Chilean entrepreneurs, like a resurfacing trauma, of the excesses of the Popular Unity. It broke the implicit contract between the business elites and the Chilean state, which held that the economic model produced enough social peace to continue accumulating wealth without the need for greater redistribution. That break is not reversed by a change in political color, because it was not caused by one either, but by a “panic” effect among entrepreneurs. There is then a double distrust: that of entrepreneurs towards the country in general, and a specific distrust towards Kast’s own government, which is paradoxical. It should be remembered that the first half of 2025 closed with 1.199 billion dollars of capital outflow. But between January and March 2026, 2.163 billion USD left, 155% more than the 848 million USD in the same period of 2025, the highest figure for a first quarter since 2022.
Q. What is your interpretation of this?
A. We are facing an irony of history: the most pro-business, most neoliberal, and most pro-market government of recent decades is seeing, so far, a considerable capital outflow. In my opinion, Kast’s election was not the most reassuring option for entrepreneurs. Evelyn Matthei was more so. The arrival of a candidate positioned at the far right of the political spectrum could reactivate the type of social conflict we already saw in 2019. Added to this is that Kast’s mega reform introduced additional uncertainty, because entrepreneurs do not like rule changes, even if they benefit from them. As one entrepreneur summarized to me: “Better to pay more taxes than not have clear rules.” That is why they go abroad, where there are no changes in fiscal policies. What is striking is that, meanwhile, foreign direct investment has remained high and continued to grow strongly in 2025 and 2026. Apparently, the doubts generated today by Chilean domestic politics do not fully convince local entrepreneurs, but they are less decisive for foreign investors, who respond more to good copper and lithium prices than to the internal political situation.
Q. What happened with Chilean investors?
A. As one entrepreneur told me, once the first investments are made abroad, it is like a wheel that has already started turning. The figures confirm that capital outflow is a long-term trend that is here to stay, despite many expecting that the change of government would reduce institutional uncertainty. This suggests a profound cultural and structural change among Chilean investors, pointing to a fundamental transformation in how Chilean elites invest their wealth, with greater openness to globalization.
Now, if we look at the most recent political circumstances, there is something notable: since the first details of Kast’s tax reform became known, many voices have been raised warning about its fiscal risks. The center-left particularly rejected the capital repatriation window, calling it a “tax amnesty.” But former Finance Minister Ignacio Briones also stated that the “project is deficit-ridden” and economist Cecilia Cifuentes was equally direct: “The project itself is not financed.” If even the right harshly criticizes the project, one must ask what remains of business confidence. Added to this is that the Constitutional Court unanimously declared admissible the three requests presented by the opposition against the mega reform, focused on tax invariability and environmental compensations. That is, the measure designed to provide long-term certainty to large investors is today subject to constitutional uncertainty. And entrepreneurs are deeply bothered by uncertainty, even when the government in power is of their own political stripe.
Q. Will the mega reform stop the capital outflow?
A. In the short term, it is very unlikely. The reform itself includes a mechanism designed precisely to bring capital back, but it has a dual structure that is not very convincing: the general rate of 10% only allows declaring the wealth held abroad, without the obligation to bring it to Chile. The reduced rate of 7%, on the other hand, requires materially bringing the resources into the country and keeping them invested here for a minimum of eight years. In other words, the real “reward” for repatriating is 3%, so it is likely that most who use this mechanism will limit themselves to declaring, without moving their money. This kind of window has already been tried before in Chile, with very mixed results.
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Another indication that the reform will not stop anything immediately is business confidence, measured by the IMCE. The index jumped after Kast’s election (from 45.28 points in December 2025 to 52.12 in January 2026), but since then it has fallen month by month to 43.62 points in July 2026, its lowest level since December 2024. This is a relevant hard fact: the most direct thermometer of local investor sentiment deteriorated while the reform was being processed, it did not improve with it.
Q. When will the effects be seen?
A. The government’s central pro-growth idea responds to a historical complaint from entrepreneurs since Michelle Bachelet’s 2014 reform, when Chile moved from an integrated tax system to a semi-integrated one, forcing business owners to use only 65% of the First Category Tax (27%) as a personal credit. The mega reform reverses this, gradually restoring the credit to 100% by 2031, a principle reminiscent of the old Tax Profits Fund, although without recreating its original mechanism. It also reincorporates tax invariability, repealed in 2014. The underlying problem, if there is one, will only be seen in the long term, and it is difficult to predict how investors will really react and whether it will stop capital flight or not. It is a bet, not a certainty.
Q. Is it relevant for the market that it was approved with minimum votes in several legislative instances?
A. Yes, because it reveals a lack of broad consensus, both political and technical. The rules that matter most to a long-term investor, such as tax invariability and environmental provisions, passed in the Senate by the mathematically narrowest margin possible. For an investor, this matters because the legal certainty that the reform promises – the asset that in theory should attract capital – depends on a circumstantial and fragile majority, not on a broad and cross-cutting agreement. A law approved by a margin of just two votes, questioned by sectors of all political colors and now under review by the Constitutional Court, is exactly the kind of signal that a long-term investor interprets as a risk of future reversal. If the political balance changes in the next election, or if the Constitutional Court rules against it, the promise of stability for 10 or 25 years may not hold. In the absence of broad political consensus, no law can offer the certainty that long-term investment really needs. Only an agreement capable of surviving government changes can provide that.
Q. What is needed to retain that capital in Chile?
A. There is a crucial factor I understood in my interviews with entrepreneurs: Chilean elites made the strategic decision to transnationalize their wealth and reduce their exposure to Chile as a long-term investment destination. It is a decision that is not reversed with a specific fiscal adjustment or a finance minister favorable to business.
What would be needed is to reach cross-cutting agreements, capable of being broadly subscribed by both the government and the opposition, and designed for the long term. What Chilean politics lacks today is to come out of its trenches. As long as we continue to have governments with a narrow view of the problem, this dynamic will not be overcome.
Q. How much does the fear of another social crisis weigh on these capital outflows?
A. One must look at the root of the phenomenon. Capital outflows began during the greatest social crisis Chile has experienced since the return to democracy. Business elites deeply fear that kind of violent eruption, and they know it could happen again. Here appears the fundamental contradiction of Kast’s program: to attract elites, the government lowers their taxes, but in doing so it precisely reduces the fiscal resources that would allow building the stability and social equity demanded during the outbreak, and that would make Chile attractive to those elites. There is a logic that ends up biting its own tail: promoting policies that strain social peace, hoping that the same social peace will return to attract investment, is asking fire to put out the fire it started.
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