Chile's Fiscal Reform Hangs as Copper Weakens, Dollar Surges

Chile's economy faces one of the densest junctures of the year this week: a sweeping tax overhaul hanging by a thread in the Senate, a dollar climbing toward $923 on the back of Federal Reserve policy, copper losing ground in global markets, and a landmark mining agreement set to reshape the country's productive geography over the next two decades. It is all happening at once, and the interplay across these fronts is setting the tone for a session that could define the economic trajectory of José Antonio Kast's government.

The political-fiscal axis is where tension runs highest. Finance Minister Jorge Quiroz is pushing for the Senate to vote this afternoon on the general merits of the reconstruction and economic reactivation bill — the so-called mega-reform — which has already cleared the Chamber of Deputies. Yet, as La Tercera reported, the vote margin is uncomfortably narrow for the Executive, and Senate President Paulina Núñez of Renovación Nacional has proposed delaying the vote to build a more solid majority. The opposition, meanwhile, is rejecting the adjustments floated by the Treasury — among them trimming tax invariability from 25 to 20 years and adding a 1.5% premium — and is demanding a "real" opening to its proposals. Quiroz, who has warned that without sustained growth above 3% "the fiscal issue has no solution," is keeping up the pressure to meet a timeline that aims to dispatch the law before early August.

The urgency around the reform is not rhetorical. The same minister must defend, in parallel, a bill that raises the debt ceiling by US$6.2 billion, in a context where the Autonomous Fiscal Council dismissed the "arithmetic inconsistencies" the Treasury had attributed to the previous government's projections — even as Quiroz insists the numbers "add up to a line item that has no basis whatsoever." The public debt debate adds another layer of pressure: with US$14.4 billion still to be placed in the second half, the Treasury will have to choose between continuing to push local rates higher or increasing foreign-currency exposure, a dilemma the market is watching with growing attention. Former Budget Director Matías Acevedo, meanwhile, publicly called on the Fiscal Council to be "clearer" in its debt projections, adding noise to a debate that already clouds the Executive's visibility.

In markets, the Chilean peso is trading under pressure. The dollar advanced to $922.12 in the first half of the session and printed an intraday high of $923.80, accumulating a $35.42 gain over six consecutive sessions — the longest streak since October 2024 — according to La Tercera. The dollar index was up 0.38% at 101.80, driven by expectations of further Federal Reserve hikes in 2026, while three-month copper on Comex retreated by roughly 3% toward seven-week lows, edging dangerously close to the US$6 per pound threshold. Brent crude, by contrast, erased nearly all of its post–Middle East conflict gains as it slid back to US$74 a barrel, following signs that maritime traffic through the Strait of Hormuz is beginning to normalize. The IPSA opened with modest gains, lifted by Latam Airlines and Mallplaza — the latter posting an 18.4% increase in market capitalization since year-end 2025, supported by a capital raise and the addition of assets in Peru. The Central Bank, for its part, confirmed in the minutes of its June meeting that it considered a rate move "inappropriate," reiterating its meeting-by-meeting approach.

On the corporate front, the day delivers mixed but meaningful signals. The most relevant comes from mining: Codelco and Anglo American formally closed the agreement for the Joint Mining Plan covering the Andina and Los Bronces deposits, a milestone that will unlock an additional 2.7 million tonnes of copper over 21 years — roughly 120,000 tonnes per year — with minimal capital investment and projected incremental value of at least US$5 billion before tax. Codelco Chairman Bernardo Fontaine described it as "a more efficient and responsible way to develop one of the world's leading copper districts." Environmental permits, however, are not expected before 2030, underscoring the long horizon of the deal. In parallel, CMPC placed hybrid bonds for more than US$310 million at a 171 basis point spread over the reference sovereign, improving on the 189 basis points of its historic debut in August 2025 — a sign that market appetite for Chilean corporate paper remains robust despite the environment. Cencosud, meanwhile, deepened its bet on Brazil with the acquisition of 100% of St. Marche, a premium São Paulo chain with 32 stores and annual sales of around US$216 million, although the firm is currently undergoing extrajudicial reorganization with debt of approximately R$639 million.

The agenda for the coming days will set the tone for the second half. The Senate vote on the mega-reform — whether this afternoon or in the coming days if Núñez's proposed pause prevails — is the most decisive event: its outcome will shape the capital markets reform the Treasury has ready to roll out immediately afterward, as well as the labor debate around childcare funding and SOFOFA's agenda to make severance pay more flexible. On the external front, the Fed's path and copper prices will continue to dictate the room for maneuver of an economy that, after contracting 0.5% in the first quarter — the worst reading for that period since the financial crisis — urgently needs precisely what Quiroz promised: growth.