Diesel hits all-time high as fuel shock deepens Chile's consumption crisis

The fifth consecutive hike in gasoline prices—which this week pushes diesel to an all-time high and leaves gasolines just cents away from theirs—has become the axis around which Chile's entire economic debate now turns, simultaneously straining inflation expectations, private consumption, and the credibility of José Antonio Kast's government fiscal program.

With Brent crude trading around US$110 per barrel—a consequence of the conflict between the United States and Iran and the disruption of traffic through the Strait of Hormuz—Enap confirmed on Wednesday a hike of $41.3 per liter for gasoline and $91.5 for diesel, effective Thursday. The price of diesel in the Santiago Metropolitan Region thus reaches $1,558 per liter, an absolute record. Analysts at OCEC-UDP project that in roughly three more weeks, gasolines will also surpass their historical highs, keeping inflation expectations for October biased upward. According to market estimates, the fuel component alone could account for half of the month's CPI change.

The paradox underlying this moment is that fuels are hitting an economy that was already weakened before the energy shock. At a Centro de Estudios Públicos panel, former Finance Minister and former Central Bank Governor Mario Marcel and researcher Rodrigo Vergara agreed that the drop in consumption expectations—the largest component of domestic demand, equivalent to one-third of GDP—was "brutal" and hard to reverse, with the so-called March "bencinazo" being the main trigger. Vergara described the damage as an abrupt interruption of an optimism cycle that coincided with the political transition, warning that reviving that dynamism is no simple task. Moody's Analytics, for its part, characterizes the moment as one of "weakness and recovery" for the Chilean economy, though the contours of that recovery remain uncertain.

Finance Minister Jorge Quiroz insisted on Wednesday at Enagro 2026 that the government is sticking to its long-term targets: trend growth of 4% by the end of the term, unemployment of 6.5%, and a structural deficit of 1.5% of GDP. President Kast himself, also present at the agricultural sector gathering, assured that 2027 "will be an extraordinary year" and called on businesspeople to extend their confidence, though he openly acknowledged that "we are in trouble with unemployment." With presidential approval that, according to Criteria, has fallen below 30%, the gap between stated goals and the visible juncture is the most uncomfortable terrain for the Executive. Quiroz defended the fiscal cuts by invoking France—"when welfare states grow without limit, they end up like France"—in a week when the yield on the French 10-year bond reached 5% for the first time since 2002, a signal that tensions in sovereign fixed income are not exclusive to emerging markets.

That pressure on long-term rates has direct consequences for the local market. Diego Pino, director and head of equity & credit trading at Scotiabank Chile, warned that several investors have taken severe losses on long bond positions, and that costlier financing hits smaller companies especially hard. In this context, the IPSA closed with moderate gains, tracking a positive session on Wall Street and European equity indices, though the sovereign debt market told a different story.

Tension in long-term rates is also the backdrop for the AFP Fondo E scandal, which so far in 2026 has accumulated a real-terms decline of 10.39%. The Pension Superintendency has opened a sanctioning procedure against the seven administrators, and the new La Moneda spokesperson, Gonzalo Arenas, called the losses "extremely serious" in his first public appearance. The problem, according to former CMF Vice-Chair Mauricio Larraín, is structural: excessive exposure to U.S. rate derivatives—swaps that extended portfolio duration beyond what was required to match annuity liabilities—generated US$7 billion in asset damage that, in his view, has already materialized and is not reversible with whatever rate cuts may eventually come. Between January and August, Fondo E recorded close to 40,000 net member outflows, while Fondo A—the most aggressive—was the only one to post net inflows, with more than 82,000. The flight toward equities amid the conservative fund's crisis expresses a behavioral paradox that is difficult for the system to manage.

In parallel, legislative progress on the Capital Markets Reform bill (MK4) offers one of the few constructive stories of the week. The Chamber's Finance Committee sent the bill to the floor, where it will be voted on next Tuesday before moving to the Senate. Among the relevant changes are the creation of a new maximum conventional rate tranche for microloans of up to UF 20—set at 29 percentage points on an annual basis—the expansion of AFP powers to administer voluntary housing savings accounts, and the approval of an innovation statute that contemplates a 35% tax credit and a capital gains exemption for investments in startups certified by Corfo. Minister Quiroz welcomed the cross-party support, though the AFP provision did not win unanimous backing from the opposition.

On the mining front, the underlying news is severe: projections from Núcleo Minero and Plusmining place 2026 copper output at around 5.15 million tonnes or even below, which would represent the lowest level in 23 years. The sector foresees a rebound only from 2027 onward, which in the short term limits the country's main source of foreign exchange and fiscal revenue. As a partial offset, two mining companies reported high-grade discoveries this week in Coquimbo and Atacama—among them Australia's Hot Chili Limited, whose "La Verde South" find practically doubles the potential of its deposit in the Atacama region—reaffirming Chile's geological appeal for international explorers, though the development timelines for those projects are long-dated.

CMPC, the pulp and paper giant controlled by the Matte family, concentrated the week's corporate attention with a second large-scale divestment: the sale of 60,000 forestry hectares in the Maule Region to JP Morgan Natural Capital for US$365.5 million, on top of the previously announced sale of its corrugated business to Smurfit Westrock for US$420 million. In less than a month, the company has accumulated close to US$800 million in divestments, as part of its asset management strategy aimed at financing the Natureza mega-project in Brazil—a pulp plant with a US$4.6 billion investment and 2.5 million tonne capacity. On the commercial side, fintech Global66 reported 74% growth in Chilean transaction volume during the third quarter, surpassing US$850 million, with the United States and Spain as the main destinations for remittances.

On the strategic link with China—Chile's main trading partner, with bilateral trade exceeding US$67 billion in 2025—Sofofa marked the 20th anniversary of the bilateral FTA with a high-level seminar that previewed the business mission to the APEC CEO Summit in November. Diversifying that relationship into services, artificial intelligence, and advanced technologies emerges as the agenda for the coming decade, though the timing of that transition contrasts with the urgency of the economic present.

What to watch in the coming days: the floor vote on MK4 on Tuesday, the October inflation print—where the fuel footprint will be decisive—oil's evolution around the US$110 threshold, and any signal from the Central Bank regarding the rate trajectory in a context where the external shock simultaneously pressures prices and consumption. The 2027 budget debate, with the parliamentary rejection of the Ministry of Science allocation and open negotiations on Housing and Health, adds another variable of fiscal uncertainty to an already sufficiently complex picture.

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