Chile's Copper Windfall Faces Urgent Employment Crisis Test

The nuclear agreement between the United States and Iran rattled global markets this week with a force that was felt sharply in Santiago: oil fell below $80, equity markets rallied, and the price of copper — already projected by the Central Bank in its latest Monetary Policy Report at $5.8 per pound for 2026 — consolidated a narrative of favorable terms of trade that Chile had not seen in years. Yet on the same day that celebrated this geopolitical détente, the dollar reversed its initial drop and closed higher above 900 pesos, accumulating a 7.4-peso gain on the week, after the cancellation of the first round of nuclear talks and the fallout from the latest Federal Reserve meeting on rate expectations. The local stock market closed in positive territory, led by a nearly 10% surge in Enel Américas after the company proposed a new share buyback program, while Falabella posted more than 100 billion pesos in traded volume, propelled by a purchase package worth 84 billion from a Scotiabank client.

The mining optimism has real foundations. Capstone Copper filed for environmental review a $500 million project to extend the operating life of Mantos Blancos through 2041, with the creation of 900 jobs during construction and the retention of 3,000 in operation. Codelco, for its part, announced a formal asset sale evaluation within its Strategic Plan, in a move that, according to the state copper miner, seeks to "identify and analyze the different alternatives that contribute to strengthening its operational and financial sustainability." Codelco's signal is no small matter: it acknowledges balance sheet pressures at a moment when the metal's price should be giving it some breathing room. For Veronika Holtz, CFO of Komatsu Latinoamérica, the diagnosis is clear: "We are seeing a new copper supercycle," said the executive, who runs the finances of the joint venture between Komatsu and Cummins in the region and who positions Latin America as the group's largest mining market worldwide. Economist Jorge Selaive goes further and projects that, barring fresh blows to confidence, "the economy should grow no less than 3.0% in 2027."

The problem lies in the meantime. The 9.1% unemployment rate recorded in the February-April quarter — the highest since the direct impact of the pandemic in 2021 — has set off every alarm in La Moneda. President Kast publicly acknowledged that the winter months will be difficult, and his Labor Minister, Tomás Rau, confirmed that "labor costs rose sharply in previous years and will continue to rise." The government's response is taking shape in a labor plan that includes the revival of the Universal Daycare bill and, more tentatively, an eventual severance-for-any-cause scheme. Rau was explicit in calling the latter a proposal "under analysis," though he acknowledged that "this is not the best moment." SOFOFA went further this week with a five-point reactivation agenda — including precisely that severance scheme and the daycare bill — and an in-house study estimating that a four-percentage-point reduction in the First Category Tax, from the current 27% to 23%, could generate at least 80,800 additional direct jobs and as many as 210,000 over four years. The business association did not mince words on the diagnosis: "investing in Chile has become too expensive and complex."

That argument resonates in the debate over Finance Minister Jorge Quiroz's mega tax reform, which last week cleared the Senate Finance Committee by a single vote — three to two. The victory was technically narrow and politically costly. Silvia Fernández, BlackRock's top executive for Chile, Argentina and Uruguay, added another warning on the legislative calendar by noting that the pension reform is "tremendously complex in terms of timelines" and that rethinking them "is prudent," not ruling out that the schedule may require a legal amendment. Fiscal discipline, meanwhile, remains the pending assignment: the IPoM assumes public spending 1.2 points of GDP higher than in March, which, according to analysts, shifts the weight of adjustment toward the interest rate or higher debt. The Central Bank, in that context, is in no position to cut the TPM, according to Selaive.

On the geopolitical front, the Kast government's alignment with Washington is producing concrete trade consequences. China has reactivated its diplomatic lobbying in Santiago, concerned that ministers and undersecretaries are not granting the audiences requested by Chinese companies in strategic sectors such as energy, mining and telecommunications. Meanwhile, Grupo CAP is exploring how to attract Argentine cargo for export to Asia through its terminals in Atacama and Biobío, a move that illustrates how Chilean logistics infrastructure is seeking to capitalize on regional trade flows amid a reconfiguration of alliances. Susan Segal, president of the Council of the Americas, who met this week with President Kast and several ministers, offered an optimistic counterpoint: "I have not been as optimistic about Chile as I am now in several years." Stefano Scarpetta, chief economist of the OECD, also acknowledged that the peace agreement between the United States and Iran "will undoubtedly have an effect on Chile," though he qualified that the institution had already cut its growth projection for Chilean GDP for 2026 from 2.2% to 1.7% before that agreement became known.

The coming week will be marked by the evolution of oil prices following the memorandum with Iran, which is already pushing local gasoline prices lower, and by the parliamentary progress of the mega reform. In the private sector, eyes will be on Grupo Everest's partner search process — whose mandate sits with BTG Pactual — and on Codelco's first moves regarding its asset review. The question that organizes everything else remains the same: if the copper supercycle is real and the terms of trade are favorable, how much of that tailwind will actually reach the labor market before the statistical winter makes its full weight felt.