Chile's recession deepens as tariff talks stall with Washington.

Chile finds itself in technical recession while negotiating tariffs with Washington, and the combination of both elements precisely defines the country's economic moment: an economy growing less than any other OECD member in the second quarter, simultaneously facing external trade pressure that threatens its most dynamic export sectors.

The data released this Monday by the OECD is stark. Of the 30 countries in the bloc with available information, 27 grew between April and June; only Austria, Belgium and Chile posted zero variation. The bloc as a whole expanded GDP by 0.5% in the quarter, accelerating from the previous 0.4%. Chile, by contrast, has accumulated two consecutive quarters of contraction in seasonally adjusted terms —as the Banco Central specified—, which technically constitutes a recession. The paradox is that this occurs in a country that in 2024 exceeded the OECD average in job creation, with a 2.5% rise versus 0.9% for the bloc, according to Diario Financiero. That past labor dynamism has not prevented Chile from now settling in as the third country with the highest unemployment in the organization, with the female rate exceeding 10% and 19.8% of the unemployed searching for work for more than a year, the most concerning indicator of all because it reveals structural, not merely cyclical, deterioration.

Business credit deepens the diagnosis. According to data compiled by Diario Financiero, loans to companies have accumulated 46 consecutive months of declines, the worst cycle on record, with SMEs as the primary casualties. This is the link that connects the technical recession to the labor market: without financing, small companies do not hire, do not invest, and do not generate the formal employment fabric the economy requires. The complementary signal comes from capital goods imports, which according to Diario Financiero halted their upward streak in May after advancing since September 2024 in categories such as mining machinery, construction, and buses. That private investment is sending mixed signals just as GDP strings together declines is not reassuring.

In this context, May's CPI offered one of the few genuine reliefs of the day. Prices rose less than expected, influenced surprisingly by a drop in the price of bread, and twelve-month inflation moderated to 3.9%, according to Diario Financiero. The market read is immediate: the expectation of a frozen monetary policy rate for the remainder of the year is consolidating. However, May's inflationary relief could be short-lived. Wheat prices have reached their highest levels in over three years, driven by disruptions in Black Sea exports and the escalation of the Russia-Ukraine conflict, which directly threatens the cost of bread and cereals in coming months. Added to this is a third consecutive weekly rise in global maritime freight rates, with the Drewry World Container Index sitting at US$4,526 per 40-foot container, a cumulative increase of 6.4% over three weeks explained in part by restrictions in the Panama Canal linked to the El Niño phenomenon. Chile, as an economy deeply integrated into global trade, absorbs this cost directly.

The most immediate external pressure, however, comes from Washington. This Monday, the meeting between USTR Deputy Representative Jeffrey Goettman and the Undersecretary of International Economic Relations, Paula Estévez, took place at the Foreign Ministry. The meeting closed without white smoke: both parties agreed to continue conversations in the coming weeks, with no announcement of concrete concessions. Business associations, which value the government's efforts, are awaiting with anticipation the results of the closing meeting scheduled for Tuesday. Foreign Minister Francisco Pérez Mackenna said he was "confident" in being able to present good arguments, but the arithmetic is demanding: 40.3% of the export basket to the United States is subject to a 12.5% surcharge, including salmon, fresh grapes, wine, blueberries and fishmeal. The negotiation also occurs at a moment of certain diplomatic diversification: Sofofa organized this week a seminar on the 20 years of the FTA with China, whose bilateral trade exchange exceeded US$67 billion in 2025 and which remains Chile's top trading partner. The preparation of a high-level business mission to Beijing in November, within the framework of the APEC CEO Summit, underscores that Santiago does not depend on a single geopolitical basket.

On the fiscal front, the budget advances in the Senate with partial agreements, and the Contraloría expands its budgetary powers while detecting $239 million in irregular subsidies in a housing program for families from informal settlements, including payments to 168 deceased beneficiaries. The Constitutional Court, meanwhile, is reviewing on Tuesday an article of the mega-reform that requires utility companies to reconnect users free of charge in disaster zones, even in cases of prior debt, a rule that the government itself is challenging on formal grounds. The AFPs, in the meantime, are activating their lobby with the parliamentary Finance and Labor committees around the implementation of the pension reform, whose pace of application has direct consequences on the gradual increase of the Universal Guaranteed Pension, which starting in September will reach $250,275 for those over 75.

What to watch in the coming hours and days is multiple but has a clear axis: the outcome of the closing meeting with the USTR this Tuesday will define whether Chile obtains a concrete roadmap or whether tariff uncertainty extends over export sectors already under pressure. Simultaneously, the evolution of business credit and second-half investment figures will determine whether the technical recession is a transitory episode or the beginning of a more prolonged cooling cycle. The Banco Central will have scant room to maneuver if inflation rebounds on freight and wheat while GDP still fails to reactivate.

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**Socovesa (BVS: SOCOVESA)** — The construction and real estate firm reported losses attributable to controllers of $13.176 billion in the first half, a 61.3% deterioration versus the same period in 2025, with revenues falling 28.8%, impacted by a deed-signing calendar concentrated in the second half and an annual billing budget 22% below the prior year. The company operates in a real estate market under systemic pressure, with funds and high-net-worth investors accelerating their exit from multifamily assets amid falling profitability.

**BTG Pactual Chile (BMF: BPAC11)** — BTG Pactual's private debt fund in Chile surpassed US$50 million in assets under management in just three months, with exposure to loans at Copeval, construction firms, and Hites, and is targeting $100 billion in assets during 2026, reflecting the growing appetite for alternative financing amid the closing off of traditional bank credit to companies.