Copper at Record High, but Chile's Fiscal Council Warns of Peril

Copper hit a new all-time high on Monday of US$6.73 per pound —equivalent to US$14,850 per tonne— amid an acute supply shortage at the London Metal Exchange, and the session laid bare a tension that defines Chile's economic moment: the country is the largest beneficiary of the red metal's supercycle, but its own fiscal institutions warn that the bonanza could become a trap if managed with complacency.

The IPSA closed higher above 11,100 points, supported in part by SQM, whose shares ran ahead of second-quarter results to be released Tuesday, for which the market projects a year-on-year increase of more than 500% in net income. The expectation is not far-fetched: lithium and copper have reshaped the geography of value in global mining, as confirmed by the results of BHP, the world's largest miner, which lifted underlying earnings by 30% to US$13.2 billion and reported that copper has displaced iron ore as its main source of revenue. The firm anticipates global demand for the red metal will reach 50 million tonnes by 2050. In Chile, however, BHP faces declining production due to falling ore grades and aging deposits, a structural warning the country has yet to resolve.

It is precisely in this context that the Consejo Fiscal Autónomo issued its most uncomfortable signal of the day. In its structural balance report published Monday, the body cools official enthusiasm: revenues derived from favorable mining performance have a "high transitory component" and should not translate into permanent spending increases. More seriously, the Council warns that Chile will exceed the prudent debt level in 2029, and that meeting the structural deficit target of 2.6% of GDP for 2026 requires executing spending adjustment measures worth US$674 million that have not yet been spelled out in sufficient detail. Fiscal consolidation also depends, to a relevant extent, on growth projections tied to the Reconstruction Law, a dependency the Council flags as a risk. In his debut before the joint Budget Committee, Dipres director José Pablo Gómez outlined four focal points for the 2027 Budget, a negotiation already showing its first frictions: Housing Minister Iván Poduje has publicly requested a 23.9% adjustment for his portfolio, a figure that collides head-on with Finance Minister Jorge Quiroz's austerity mandate.

Against that backdrop of fiscal tension, Credicorp projects growth of just 1.1% for Chile in 2026, underpinned by improved prospects for private investment. Its CEO, Gianfranco Ferrari, noted that elevated copper prices and recent policies to incentivize investment could support a recovery, though the figure remains modest for an economy enjoying the tailwind of a metal trading at record highs.

The week also opens with signs of movement on the concession and industrial fronts. In the energy sector, Enel broke ground on the BESS Finis Terrae storage project, an US$80 million investment integrated into the existing photovoltaic plant in the Antofagasta Region, in line with the transition toward more flexible generation systems. Dipres, for its part, instructed roughly 60 public institutions —mainly in the healthcare sector— to become free-market energy clients, an efficiency measure that could be extended if more state agencies meet the required power threshold.

In the private mining arena, the Tovaku project emerges forcefully, an alliance between Codelco and Pucobre —the firm controlled by the Hurtado Vicuña and Fernández León Hurtado families— valued at US$870 million. According to filings with the CMF, the structure contemplates a company with 60% private participation and 40% state ownership, which would make it the first public-private alliance of the new Codelco board era headed by chairman Fontaine. The initiative arrives as the debate over the state copper company's governance model reaches unusual intensity, with opposition voices openly discussing private capitalization schemes —even partial ones— and the ruling coalition resisting with arguments combining industrial policy and ideological doctrine. The president of the Chamber of Deputies, Jorge Alessandri, published a column calling to bring "the ball back down to earth" in the Codelco discussion, a signal that the topic will continue to generate legislative pressure.

On the foreign trade front, the Los Libertadores pass began its gradual reopening for truck traffic Tuesday after 35 days closed —a record— with more than 1,550 vehicles stranded on the Argentine side. Binational logistics will begin normalizing gradually, though the accumulated congestion will pressure supply chains for several days. At the same time, White House trade advisor Peter Navarro explicitly warned countries with low tariffs —including Chile, mentioned in the investigation into export "triangulation"— that preferential access to the U.S. market is not a "license" to re-export third-country goods. The warning raises the risk of a review of the Chile-United States Free Trade Agreement at a moment when Santiago is also looking toward Beijing: Sofofa organized a seminar this week marking the 20-year anniversary of the FTA with China, whose bilateral trade exceeded US$67 billion in 2025, and is preparing a high-level business mission for November in the framework of the APEC CEO Summit 2026.

On the tax front, two measures from the Reconstruction Law are drawing the attention of high-net-worth investors: the reduction of the gift tax and a regime for regularizing capital held abroad that could benefit family offices, while the one-year suspension of VAT on housing is shaping up as a mechanism to unlock accumulated inventory in the real estate sector. Fuel prices, meanwhile, will rise again by roughly $30-$38 per liter this Thursday, adding pressure on operating costs in a year when cost inflation remains a factor of concern for companies.

What to watch in the coming sessions is SQM's second-quarter result, which will be the first major test of how much of the market's optimism on non-metallic mining is grounded in actual earnings. The publication of the detailed US$674 million fiscal adjustment measures demanded by the Consejo Fiscal will be equally decisive in evaluating the credibility of the fiscal rule before the budget discussion begins in earnest. And the progress —or stalling— of the Tovaku project's corporate structure will indicate whether Codelco is in a position to execute alliances that allow it to finance its investment agenda without relying exclusively on state transfers.

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**BHP Group (NYSE: BHP)** — The world's largest miner reported underlying earnings of US$13.2 billion, a 30% increase, with copper displacing iron ore as the main source of revenue for the first time in its history. In Chile, the company faces declining ore grades at its deposits, limiting production upside despite the favorable price environment.

**SQM (NYSE: SQM)** — The non-metallic miner will release its second-quarter results Tuesday, with the market projecting a year-on-year increase of more than 500% in net income, driven by lithium and copper prices. Its shares provided support to the IPSA in Monday's session, front-running the announcement.

**Enel Chile (BCS: ENELCHILE)** — The Chilean subsidiary of the Italian utility broke ground on the BESS Finis Terrae storage project for US$80 million in the Antofagasta Region, integrated with its existing photovoltaic plant, in a bet on grid flexibility in the country's north.