Commodity Boom Clashes with Chile's Persistent Economic Weakness

The tension between the present and the future has never been sharper in Chile than at this moment: the economy is technically in recession, and yet the government is celebrating historic commodity prices, a flurry of approved investment projects, and reforms that promise to transform the regulatory framework. Resolving that contradiction is the central challenge defining today's economic landscape.

The macroeconomic backdrop is uncomfortable. According to the analysis of Moody's Analytics' Latin America director, Alfredo Coutiño, Chile is on the verge of a technical recession, a diagnosis supported by a 0.3% GDP contraction in the first half. Former Central Bank president Joaquín Corbo goes further and projects growth of just 0.9% to 1.4% for the full year, warning of what he calls "the tragedy of the labor market," an unemployment rate that has failed to break through the 8% threshold for 42 months. Construction retreated 3.2% in the quarter, mining fell 6.4% due to maintenance, and fishing gave up 5.9% on weather-related factors. The first-half numbers are, objectively, bad.

And yet, the government of José Antonio Kast chose this Thursday to deploy a diametrically opposite narrative. At the 2026 Mining Summit organized by Sonami, the president and the dual Minister of Economy and Mining, Daniel Mas, appeared with a message of historic opportunity. "The price minerals are fetching today is incredible," said Kast, pointing to copper — which has hit all-time highs driven by the energy transition and the explosion of artificial intelligence — alongside lithium, gold and silver. Mas was even more direct: he announced the reduction of sectoral authorizations from 55 to 13 to unblock projects, spoke of "leaving behind statist dogmatism," and called for this Friday an unprecedented meeting with the Mining Ministers of Argentina, Bolivia and Peru, aimed at coordinating regional development and potentially unlocking some 500,000 tons of mineral concentrated in border zones between Chile and Argentina. The geopolitical dimension of that gathering is not trivial: it represents the first systematic attempt to build a South American mining architecture just as the world competes to secure critical supply chains.

The government's argument rests on the reform that Finance Minister Jorge Quiroz described this Thursday in almost triumphant terms. Following the Constitutional Court ruling that upheld tax invariability — the core of the so-called mega-reform — Quiroz stated that "the ruling is very, very, very forceful" and put at US$38 billion the total investment projects filed with the system between March 11 and August 27. From UBS Chile, country head Jerónimo Correa backed that reading, noting that clients of the firm are already requesting advisory work to assess opportunities in the country, and that the reform is building "a very strong calling card" for the entry of fresh capital. Caution is warranted: Quiroz himself acknowledged that the fruits of that seeding will not arrive before 2029.

The debate over the capital market adds another layer of complexity. Former Pensions Superintendent Osvaldo Macías posed an uncomfortable question at a university forum — "why do AFPs invest so little in Chile?" — noting that only 44% of pension fund assets are allocated to local assets, versus nearly 60% before the 2019 social unrest. The question points directly to a paradox: Chile needs domestic investment while its own pension institutions are seeking it abroad. In parallel, the Finance Ministry is evaluating changes to capital gains taxes and external financing as part of a package to revitalize the capital market, a signal that the government recognizes the tax reform does not resolve everything on its own.

In markets, the IPSA rebounded, driven by the commodities sector and by the spillover effect from Wall Street, where Nvidia projected a 70% jump in annual sales, fueling optimism in the global tech sector with direct implications for copper and lithium demand. The exchange rate, however, closed above $925 per dollar, accumulating more than $10 of depreciation in two days, a reflection of the attention operators are paying to the central bankers' symposium at Jackson Hole. The remarks Federal Reserve Chair Kevin Warsh delivers this Friday will be decisive: the market is pricing in roughly a one-third probability of a rate hike in September and considers another one in December practically a done deal, keeping the Chilean peso under pressure.

On the trade front, the day was exceptionally active. Washington is reportedly set to present within two weeks a proposal to expand the tariff exemption to more Chilean products, potentially exceeding the 53% of exports that currently access the US market free of the 12.5% tariff. In Asia, Chile obtained from Vietnam authorization to export cherries without cold treatment — a concrete competitive advantage for the coming season — and made progress in negotiations to open that market to meat, blueberries and kiwis. Simultaneously, the head of Subrei held a meeting with India's Commerce Secretary, Rajesh Agrawal, to advance a bilateral agreement. Trade diversification is, at least on the diplomatic front, gaining pace.

What to watch in the coming days is multifaceted. Warsh's words at Jackson Hole will set the tone for the exchange rate and for the global financial conditions that affect the financing cost of Chilean investment projects. Friday's ministerial mining conclave could lay the groundwork for a regional architecture that would amplify Chile's strategic positioning in the critical minerals value chain. And on the domestic front, the real gauge of whether the government's bet is working will not be the permits approved or the projects filed, but the effective employment and investment figures that will begin to reflect — or not — the impact of the mega-reform in the coming quarters.

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**Mercado Libre (NASDAQ: MELI)** — The Argentine company announced it will triple its logistics capacity in Chile, from 140,000 to 450,000 square meters by the end of 2027, with two new distribution centers of roughly US$120 million each, plus five last-mile centers in 14 regions. The expansion, presented to Finance Minister Jorge Quiroz, consolidates Chile as one of the platform's priority markets in Latin America.

**Molymet (Santiago: MOLYM)** — The world's largest molybdenum refiner lifted its earnings by 50% in the first half and surpassed US$1.5 billion in sales, with EBITDA of US$114.7 million, while projecting investments of US$90 million for the year and beginning its industrial foray into the United States, a key market given molybdenum's use in high-strength steels and energy applications.

**CMPC (Santiago: CMPC)** — Itaú BBA cut its price target for the Chilean forestry company to $1,000 per share, the lowest floor among the 15 estimates compiled by Bloomberg and well below the consensus average of $1,500, citing uncertainty about the Natureza megaproject in Brazil and the company's higher leverage, whose operations span Latin America and whose bonds trade in international markets.