Copper hits record as Chile's fiscal windfall masks Codelco's structural crisis

Copper closed yesterday in London at US$6.55 per pound, 38.9% above the 2025 year-to-date average and in record territory, and that single data point reshapes much of Chile's economic agenda today: it transforms the fiscal outlook, complicates Codelco's narrative, and, paradoxically, arrives at a moment when the producing country itself is grappling with its own internal contradictions on investment, employment, and corporate competitiveness.

The most immediate impact of the metal's price is on public coffers. According to estimates compiled by Diario Financiero, the Treasury could take in more than US$9 billion above budgeted levels, a figure that offers temporary relief from the pressure Finance Minister Jorge Quiroz has been exerting on spending, including the recent — and politically costly — decision to postpone US$400 million in public transport corridor tenders in Biobío. That move triggered an open confrontation with UDI deputies, coalition partners of the government, who lobbied the President directly until obtaining what they described as a commitment to preserve the works. The episode neatly illustrates the tension between short-term fiscal austerity and the infrastructure investment demands of a coalition that needs to deliver visible results in the regions.

But the copper rally does not resolve Codelco's structural problems. The chairman of its board, Ernesto Fontaine, warned this week of "four difficult years" ahead for the state-owned miner and announced a reassessment of its US$34 billion investment plan, with stricter selection criteria, greater reliance on public-private partnerships, and evaluation of asset sales. That Codelco is facing its own funding constraints precisely as copper hits records says something meaningful about accumulated debt, historic cost overruns on its structural projects, and the urgency of more efficient management. The spot price is good news, but it is no substitute for capital discipline.

In local markets, the IPSA closed near 11,300 points, posting the best day among major international indices on an FX-adjusted basis, driven by earnings season and by the relief among investors following approval of the Kast government's mega-reform — though the latter remains under scrutiny at the Constitutional Court after challenges from the opposition. The local dollar closed marginally higher, contained by a resurgence of Middle East tensions that momentarily tempered the copper rally: Brent crude advanced 4.3% to US$82.9 per barrel and US Treasury yields rose around five basis points at the ten-year tenor, signals the market read as reasons for caution ahead of US labor data.

Corporate earnings painted a mixed but nuanced picture. Cencosud, the retail holding controlled by the Paulmann family whose shares trade on the Santiago Exchange and whose ADRs list in New York, reported losses attributable to controlling shareholders of $36.455 billion in the second quarter, versus profits of $86.941 billion in the same period of 2025. The deterioration was driven mainly by non-operational factors — UF-indexed debt costs and FX movements — though CEO Rodrigo Larraín explicitly acknowledged "aggressive competition" in Chile. CFO Andrés Neely ruled out that the weakness would persist into the second half and pointed to signs of recovery in the domestic market, but the company stopped short of reaffirming its annual guidance, an omission analysts did not overlook. In parallel, the Paris brand — part of the same conglomerate — inaugurated a remodeled store at Alto Las Condes, a strategic bet in a still-weak consumer cycle.

CMPC, the Matte group's forestry arm, also reported pressured results: first-half earnings fell 74% to US$33 million, though total revenues held steady at US$3,733 million. The cushion came from Softys, the tissue segment, whose sales grew 10% on the back of Brazil and Mexico, offsetting weakness in pulp and biopackaging. CEO Francisco Ruiz-Tagle pointed to a gradual improvement in market conditions.

On the broader macro front, the Central Bank's Business Perceptions Report revealed that firms are flagging cost increases — fuel, transport, inputs — and have practically halted net hiring, though they anticipate a stronger second half. Labor costs accelerated in June, with real wages growing 2.3% year-on-year, as the effects of the workweek reduction and the pension reform begin to filter through the data. The record number of new pensioners in the first half — 98,831, up 3.5% from 2025 — reflects both demographic aging and the concrete incentive to access benefits under the new pension reform, whose Sistema Único de Cobranza de Cotizaciones has already recovered 40% of the declared and unpaid pension debt from May, with projections to settle between 80% and 85% over four months.

On medium-term policy, the Finance Ministry formalized the creation of a public-private working group to turn Chile into an exporter of financial services, with an ambitious target of 50,000 additional jobs and the aim of positioning the sector as the country's second-largest exporter after copper. The initiative requires dismantling regulatory barriers that today prevent brokerages, fund managers, and financial institutions from serving non-resident clients.

Next week will stress-test several of these narratives at once: US labor data will determine whether the copper rally has further to run or faces correction; the Constitutional Court must rule on the mega-reform, whose promulgation conditions the implementation of the pension reform and part of the tax framework; and the government will need to clarify whether Quiroz's fiscal austerity can coexist with the political pressure to sustain public investment in the regions. The copper price buys time. It does not buy certainty.

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**Cencosud (NYSE: CNCO)** — The holding reported losses of $36.455 billion in the second quarter of 2026, reversing from profits of $86.941 billion in the same period a year earlier, hit by UF-linked debt financing costs and FX exposure. The company declined to reaffirm its annual guidance amid persistent "aggressive competition" in its Chilean domestic market.

**CMPC (SSE: CMPC)** — The Matte group's forestry subsidiary posted a 74% drop in first-half earnings to US$33 million, with adjusted EBITDA retreating 14% to US$525 million. The Softys segment — with direct exposure to Brazil and Mexico — grew sales 10% and served as the main buffer against weakness in pulp and biopackaging.

**Coca-Cola Andina (NYSE: AKO.B)** — The bottler returned to the local fixed-income market for the first time in eight years, placing its inaugural green bond for more than US$110 million at the tightest spread recorded so far in 2026 for paper of the same credit rating, a sign of balance-sheet strength in a still-elevated rate environment.