Structural reforms collide with Chile's accelerating labor market collapse.

President José Antonio Kast's government unveils its "Plan Chile Despega" this Monday amid the worst labor crisis the country has faced since mid-2021, and the coincidence of that announcement with economic data expected to disappoint turns the day into an inflection point for the administration — while also laying bare an underlying tension that dominates Chile's economic debate: the gap between the structural reforms the government is trying to push through and an economy deteriorating faster than policy can contain.

The unemployment rate stands at 9.5%, with 981,000 people out of work, and GDP has contracted 0.4% cumulatively between January and July. Year-end estimates point to growth below 1%. Against that backdrop, the Universidad San Sebastián poll released today lands as a politically devastating blow: 67.5% of Chileans rate the overall economic situation as bad or very bad — a figure that stood at 18.1% twelve months ago — and just 27.3% believe the economy will be better a year from now. Unemployment has displaced insecurity as citizens' top concern, jumping 19 percentage points from a year earlier. These are numbers that turn economic policy into political urgency.

Kast's plan rests on three pillars: an employment subsidy, adding 75,000 new slots to the Unified Employment Subsidy; public investment channeled through the Ministry of Public Works; and a boost to the housing sector backed by US$200 million in investment through year-end. Interior Bi-Minister Claudio Alvarado described it on Sunday as an "integrated initiative," while Economy Bi-Minister Daniel Mas has insisted that jobs are not created by decree but by generating investment — a line that dovetails with what SOFOFA has been advocating for weeks in its labor-reactivation agenda, which includes reforming severance-based indemnity toward an individual account, universalizing childcare, and reducing environmental permitting, identified by the industry group as the leading obstacle to investment.

Economist Sebastián Edwards, in remarks to Diario Financiero, gives the government a grade of 4.9 — and a higher 5.2 to Finance Minister Jorge Quiroz — but with meaningful caveats: "He was a touch too purist. He put too much emphasis on fiscal adjustment and underestimated the magnitude of the external shock and the speed at which the labor market was deteriorating." Edwards's judgment crystallizes the real tension: Chile needs fiscal consolidation to protect its credit rating — a topic occupying market analysts as the 2027 Budget approaches, due to be presented before September 30 — but it also needs immediate stimulus to stem the hemorrhaging of jobs. Central Bank board member Kevin Cowan offered a note of caution, saying that events over the past days and weeks fall "within the risk scenarios" contemplated in the latest Monetary Policy Report, whose baseline scenario he considers "fully valid."

The external scenario Cowan alludes to is dominated by oil. Brent tops US$108, accumulating a 68.2% rise so far in 2026, driven by the conflict between the United States and Iran and the closure of the Strait of Hormuz. The effect is global: inflationary pressure, rate hikes by the Federal Reserve, and a stronger dollar that erodes emerging-market assets and makes Chilean imports more expensive. The IPSA is up just 7.4% for the year, a fraction of what the Nasdaq — propelled by Nvidia, Meta, and Micron — has gained on the tailwinds of artificial intelligence. Against that backdrop, strategists polled by La Tercera for the final quarter maintain an overweight in U.S. equities, though they identify the IPSA as a value opportunity heading into 2027, partly supported by pension reform and the MK4 capital markets reform. The latter takes on particular relevance: pension fund assets have fallen from 84% of GDP in 2020 to 64% today, and the average mortgage rate has risen from 3.1% to 4.5%, shutting thousands of families out of homeownership. MK4 — with its Fondo Nacional de Vivienda (Fonavi) and Voluntary Housing Savings — targets that gap directly.

On the trade front, Chile took a discreet but strategically meaningful step: the member countries of RCEP — the largest free trade agreement in the world by combined GDP — created a working group to manage Chile's accession. The move comes as SOFOFA celebrates the 20th anniversary of the FTA with China, whose trade flow reached US$67 billion in 2025, and prepares a high-level business mission to Beijing for the APEC CEO Summit in November. Diversifying markets and deepening ties with Asia-Pacific is one of the few long-term levers Chile can pull with relative independence from the domestic cycle.

In the productive sector, aquaculture and agribusiness are showing signs of structural transformation. A cross-sector alliance projects adding 190,000 hectares to salmon feed production through crop conversion — from sugar beet to grains — in an operation that relieves farmers and reduces supply risks for the salmon industry. Germany's Saria group, which already took a stake in Fiordo Austral, is betting on replicating in Chile its technology for valorizing meat by-products, including the production of anticoagulant from waste. These moves point to a salmon industry seeking autonomy in its input chain and to foreign capital with a long-term view.

What comes next will determine whether "Plan Chile Despega" manages to change the narrative or is buried by the very data that motivated it. This week the Imacec and the employment figures for the June-August quarter will be released, likely confirming the slowdown. The 2027 Budget — which will have to balance fiscal consolidation with room for reactivation — will be the definitive test of whether the government can sustain its credit rating while responding to a citizenry whose patience, according to the polls, is running out fast.

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