Brazilian election result sends Chilean markets soaring despite domestic fiscal pressures.

The outcome of the first round of Brazil's presidential elections ignited Chilean markets on Monday with an intensity that overshadowed almost any other local variable: the IPSA closed at 11,123.8 points, a 1.9% advance, while the Ibovespa surged nearly 8%, breaking the historic 200,000-point barrier after Flávio Bolsonaro was confirmed to have taken 47% of the vote, positioning him as the undisputed favorite for the runoff against Lula da Silva. The external tailwind arrived at a moment when the domestic agenda was hardly trivial—the first budget of the Kast administration, pressures on the exchange rate, inflation at the ceiling—but it was the Brazilian-exposed assets that set the tone for the session.

Latam Airlines was the day's flagship stock, jumping 6.3% on the Santiago Exchange, combining the electoral tailwind with a rating upgrade from Fitch Ratings, which raised its credit rating highlighting the strength of its competitive position, its cost hedging strategy and its capacity to absorb temporary pressures stemming from higher oil prices. Brazil accounts for roughly 40% of Latam's regional market, a concentration that turns any shift in the neighboring country's business climate into a first-order event for the airline. Enel Américas and CCU joined the rally. From UBS, Emerging Markets CIO for the Americas Alejo Czerwonko noted that the electoral results "have increased the probability of a government transition and of a more constructive fiscal policy framework," which would particularly benefit Brazilian equities, which maintain attractive valuations. Itaú Unibanco rose as much as 15% on the NYSE; Bradesco, 18%.

The most revealing market episode of the day, however, did not take place on the exchange but in the FX market. The dollar came perilously close to the psychological $1,000 threshold during early morning trading, reaching a high of $994.90, amid a global strengthening of the greenback—the DXY index touched its highest level since April 10—and the specific weakness of the euro, whose fall to 17-month lows revived ghosts of the European sovereign debt crisis. It was then that the Budget Office stepped in with an announcement of FX sales of up to US$600 million per week during October, a signal powerful enough to drive the exchange rate down more than $19 within minutes, registering the largest daily decline since April 9. At the close, the dollar stood at around $972.50. The intervention succeeded in containing the pressure, but the FX dynamic has not gone away: the market projects September inflation at 0.5% monthly and 4.2% annually, and the exchange rate is today the variable firms identify as the main factor that could push annual CPI toward 5% by year-end, according to the Central Bank's Survey of Price Determinants and Expectations. Firms, for their part, reduced their two-year inflation expectations to 3.3%, a signal of medium-term anchoring, but the short-term pressure persists.

On the fiscal front, the arrival of the 2027 Budget in Congress captured the day's political attention. The Kast government is seeking borrowing authorization of up to US$25 billion, a figure that exceeds the ceiling of any previous budget and which experts describe as high, though Finance Minister Jorge Quiroz justified it as the result of refinancing of pre-existing debt and deficit financing. Total spending amounts to $91.18 trillion pesos, with Health, Education and Labor as the ministries with the largest budgets. The ruling coalition's internal discussion already showed cracks on day one: the elimination of the "Yo elijo mi PC" program—which provided computers to public education students—became the first fracture point between the government and its own benches, with the UDI expressing formal rejection. Quiroz responded by noting that the budget "is not written in stone" and pledged to deliver periodic information to Congress, accepting modifications grounded in data. The subcommittee that will analyze the most sensitive line items—Housing, Interior, Education and Culture—ended up chaired by opposition senator Yasna Provoste, following a drawing of lots that resolved a tie, which anticipates a particularly complex path through Congress for the Executive.

In mining, the Atacama region today offers the most interesting counterpoint in a sector that is recording activity declines in other producing regions: the start-up of Salares Norte, Gold Fields' first greenfield project in more than a decade in Chile, explains why that region grew nearly 10% while the rest of the mining north contracts. The episode illustrates the thesis defended by Joaquín Villarino, president of the Consejo Minero, who played down the "mining recession" diagnosis by noting that the coming years will see new developments gain ground over expansions of existing operations. Meanwhile, Minera Escondida requested mediation with its supervisors' union, extending a chain of labor negotiations in the sector that the market is following closely given the mine's weight in global copper output. On the international front, Peru's Buenaventura opened the door to leaning on the Luksic group to develop its Trapiche and Coimolache Sulfuros copper projects, while Antofagasta reported that its share of results from associates and joint ventures jumped from US$33.3 million to US$164.4 million, largely thanks to the greater contribution of that same Peruvian miner.

What's coming in the next few days will set the tone for the fourth quarter: on Tuesday, Minister Quiroz presents the State of Public Finances before the Joint Budget Committee, at which point the official macroeconomic and fiscal scenarios for 2027 will be known. Simultaneously, the Santiago Court of Appeals will review the annulment appeal in the SQM case, whose ruling could reopen a politically high-impact process. In the FX market, the sustainability of the Executive's intervention will be put to the test against a global dollar that remains at elevated levels. And the September CPI reading, which the market anticipates without surprises, will be the first confirmation—or refutation—of whether the short-term inflationary pressure responds to FX dynamics or has more structural roots.

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