Copper hits record high as Chilean exports collapse and joblessness surges

Copper hit a new all-time high today of US$6.59 per pound on the London Metal Exchange, a figure that neatly encapsulates the paradox Chile now faces: the country's leading export commodity is setting records on international markets even as its exports fall, the economy stalls, and unemployment climbs to levels not seen in five years. That contradiction — booming prices, deteriorating volumes and domestic welfare — is the thread running through the day.

The red metal's rally now stands at 17% year-to-date and 47% over the past twelve months, driven by a structural mismatch between an aging mining supply base and rising demand from data centers, renewable energy, and electrical infrastructure. Adding to the mix today was an escalation of tensions in the Strait of Hormuz, where the exchange of threats between Washington and Tehran — with Saudi Aramco facilities attacked in Jizan — pushed Brent to US$97 and once again brings oil close to the triple-digit threshold. Economy Minister Daniel Mas already signaled that fuel prices will rise by around ten pesos per liter, adding further pressure on an inflation picture that economists at the Monetary Policy Group (GPM) already view as tilted to the upside on the energy component.

Despite copper's record high, mineral exports fell in August for the first time since 2023, according to Central Bank figures. Copper shipments totaled US$4.625 billion, a 3.2% annual contraction and the lowest reading since July 2025, dragged down by a 16.3% drop in concentrates. The most striking data point came from the UDP's Economic Context Observatory: shipments to China, the leading destination, plunged 27.7% year-on-year, while those bound for the United States tripled, jumping 200.8%. The redirection of flows toward the North American market — anticipating potential tariffs from the Trump administration — explains part of the shift, though it does not offset the aggregate decline. The IPSA closed nearly flat in a thinly traded session, with Wall Street closed for Labor Day, and the dollar posted a slight advance despite the metal's record.

Against this backdrop, the Monetary Policy Group recommended on Monday that the Central Bank hold the Monetary Policy Rate at 4.5%, noting that domestic activity has been weaker than anticipated and that inflation, though without major surprises, presents upside risks in the short term. Juan Pablo Medina, a GPM member, was explicit in calling for greater budgetary caution: "We need to be far more cautious with the Budget, which ideally should grow less than GDP." The recommendation comes at a moment when the international backdrop is also tightening: the Federal Reserve, under Kevin Warsh, still points to inflation as its primary concern, and markets are assigning greater probability to a potential rate hike, while the European Central Bank grapples with inflation that accelerated to 3.3% annually in August.

The fiscal dimension of the day was equally dense. President Kast and Minister Quiroz laid out the pillars of the 2027 Budget with a message of explicit austerity: a maximum spending increase of 1% over the previous outlay, with which the president said he expects to "cover all basic needs." Economist Patricio Rojas took a more critical view, warning that the government is entering this discussion with "a weaker starting point than expected" and that the Finance Ministry will have to contain social demands while grappling with unemployment at 9.5%. For his part, economist Ángel Cabrera cautioned that a severe fiscal adjustment would deepen the stagnation and that any cuts should not once again fall disproportionately on public investment, as has happened in previous years. The Constitutional Court, meanwhile, is keeping the promulgation of Quiroz's mega-reform — approved by Congress on August 12 — in suspense, with two review sessions scheduled this week, though that does not guarantee an immediate verdict. The delay prolongs uncertainty over provisions with immediate tax impact, such as incentives for the real estate sector and rules on donations and inheritances.

The labor market delivered mixed signals. The unemployment rate stands at 9.5% for the May-July rolling quarter, with a net destruction of 16,292 jobs — the first since the pandemic — but the Central Bank's job postings index recorded its smallest drop in ten months in August, and dismissals on the grounds of company need fell 4.2% in the first half, the first contraction in five years for that period. Wages, meanwhile, accelerated in July: average hourly ordinary compensation reached $7,599 according to INE, though the rise in labor costs is raising concern among employers at a time of tight margins.

The capital markets reform, dubbed MK4, was postponed until this Wednesday so that President Kast himself can lead its presentation, a gesture the Executive is seeking to invest with civic symbolism. According to parliamentary sources cited by La Tercera, the bill would include adjustments to APV Regime A and mechanisms to facilitate access to housing, though it would leave out changes to the Maximum Conventional Rate and the tendering of mortgage life insurance, in concessions to the political process. The urgency is significant: according to the Association of Banks, housing prices in Chile have quadrupled over the past sixteen years while wages have barely multiplied by 2.6, and the financial burden of a typical mortgage today amounts to 37.5% of a household's disposable income, compared with 25% in 2010.

On the industrial front, the entry of Germany's Saria group — through its subsidiary Bioceval — with around 40% of the ownership of Fiordo Austral marks a significant bet by European capital on the circular economy of Chile's salmon industry. The firm, linked to the Hurtado Vicuña family and to Ramón Yávar, processes 350,000 tons of salmon byproducts annually, generates revenues of US$377 million according to its latest sustainability report, and sends 60% of its output to Asia. The transaction was financially advised by LarrainVial on behalf of the buyers. In parallel, CMPC expects to obtain in September the preliminary license for its Natureza pulp plant in Brazil — the forestry company's largest foreign investment — though it faces a fresh attempt to suspend its environmental permitting process, with a second evaluation pending from the Fundação Nacional dos Povos Indígenas.

What will set the tone in the coming days is the presentation of the MK4 reform this Wednesday and the eventual resolution by the Constitutional Court on the tax mega-reform, whose promulgation could clear the way for reactivation incentives before year-end. The Central Bank will convene its monetary policy committee in an environment where oil prices, the Middle East conflict, and Fed signaling complicate any dovish bias. And in the copper market, the question is whether historic prices can hold once the geopolitical noise subsides, or whether the structural mismatch between supply and demand — the fundamental argument — is robust enough to keep the metal at these heights.

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