Chile's recession shadow looms despite 2027 growth promises

The most revealing moment of Enade 2026 was neither the executives' optimism nor President Kast's call to invest, but rather the implicit confession underlying both: Chile is skirting recession in 2026, with negative Imacec readings set to extend through the remaining months of the year, and the recovery promised for 2027 rests on an exceptionally low comparison base and on projects that have yet to secure the permits needed to materialize.

Finance Minister Jorge Quiroz was unusually blunt before more than twelve hundred attendees at the Metropolitan Santiago: "We are going to be living with negative Imacec figures in some months for the remainder of the year," attributing part of the deterioration to drops of 15% to 17% in copper mining output in recent months. The economy has accumulated a -0.5% reading between January and August, and projections for the full year have been revised downward on a sustained basis. Even so, Quiroz offered a nuance the market would do well not to ignore: the non-mining component of Imacec has accumulated seasonally adjusted growth of 1.8% over the last two months, and activity in commerce and services, as measured by SII electronic receipts, grew 4.9% in September. The divergence between mining Chile and services Chile is today the most important tension framing the country's economic debate.

The consensus at Enade was that the economy will grow more than 3% in 2027, a figure that appears in the National Budget and that the CPC, led by Susana Jiménez, also endorses, projecting a range of between 3% and 3.5%. The arguments are plausible: projects worth nearly US$40 billion submitted to the SEIA and a private investment pipeline exceeding US$95 billion according to the CBC's registry. However, economist Sergio Urzúa warned at the same forum that growth of at least 3.7% is required just to prevent unemployment from continuing to rise, a threshold the current consensus does not reach. To this is added a long-term demographic warning: a potential shortfall of 59,000 workers between 2040 and 2050, a figure that reframes the growth debate in terms of structural urgency, not merely cyclical concern.

The condition executives repeated most insistently was neither the interest rate nor the exchange rate, but permitting. SOFOFA president Rosario Navarro, having toured the country's 16 regions, identified common obstacles from Arica to Magallanes: lack of legal certainty, permit processing, land-use planning, and infrastructure gaps. The business group estimates that executing the projects currently under environmental review would reduce the national unemployment rate from 9.6% to 8%. In that context, the meeting Minister Quiroz held with the president of the Supreme Court, Gloria Ana Chevesich, to address delays in the environmental courts takes on concrete economic significance: the Finance Ministry committed resources to automate and expedite rulings, a link that had been ignored in the debate on unlocking investment.

In markets, the session precisely reflected the tension between domestic and external signals. The IPSA closed lower in line with generalized weakness across Latin America, pressured by the restrictive bias of Chile's central bank, which kept the Monetary Policy Rate at 4.5% but signaled growing concern over imported inflation, a first-order dilemma given that the dollar closed near $988, driven by comments from Federal Reserve Chair Kevin Warsh that pushed the ten-year Treasury yield to recent highs. Money markets anticipate another U.S. rate hike in December, which keeps pressure on the Chilean peso. Non-resident investor positions against the local currency remain elevated, though they have retreated from more than US$20 billion to US$18.273 billion, which could become a source of relief if the unwinding continues.

The Autonomous Fiscal Council this week delivered a nuanced reading of the public accounts. It acknowledged that meeting the Structural Balance target in 2026 and 2027 would be the first in four years, driven in part by higher copper and lithium prices and by the Kast administration's spending containment efforts. But it warned that projected expenditure exceeds what was approved in the 2026 Budget Law by 0.28% of GDP, and that the net adjustment relative to the first-quarter report amounts to just 0.07% of GDP. Fiscal room for maneuver is narrow. In that context, the Treasury reported that in the first eleven days of the mega-reform's implementation, 5,430 payment agreements have been signed, with immediate collections of $2.447 billion and committed debt of $41.959 billion on deferred terms, representing modest financial relief but with visible political impact.

On the external front, Undersecretary Paula Estévez met this week in Washington with U.S. Trade Representative Jamieson Greer to advance bilateral negotiations on U.S. tariffs. Currently 53.6% of Chilean shipments are exempt from the 12.5% surcharge, and Chile is seeking to expand that universe. Chilean commercial diplomacy operates in an environment where Washington is negotiating simultaneously with multiple countries, which reduces Santiago's individual bargaining power. In parallel, SOFOFA is reinforcing the European front, proposing that Chile act as a bridge between the European Union and the CPTPP within the framework of the Advanced Framework Agreement, with emphasis on critical minerals and export diversification, a long-term bet that gains relevance amid the volatility of the commercial link with the United States.

In the mining sector, Marimaca is advancing on the closing of a loan of approximately US$400 million to develop its open-pit copper project in the Antofagasta Region, designed to produce some 50,000 metric tons of refined copper per year. The company, which trades on the Toronto and Sydney exchanges, could considerably expand the operation with the development of the Pampa Medina deposit. The financing, if finalized, would be a signal of international capital markets' confidence in Chilean mining at a moment when domestic production is going through its worst stretch in years. Annuity rates continue their downward trend, averaging 2.84% in September, below the 2.89% recorded in the same month of 2025, further pressuring returns in the pension system at a time when the debate over MK4 remains open in the Senate, with the design of the mortgage fund and the role of the AFPs as the most contentious points.

What lies ahead is decisive. Next Monday the Central Bank will publish the September Imacec, and although the market already prices in a negative reading for the mining component, the evolution of the non-mining component will be the real thermometer of the state of domestic demand. Any upside surprise in that indicator would reframe the debate on when the Central Bank might begin to cut rates, currently frozen at 4.5% amid inflationary pressure. Meanwhile, the Chamber sent to law the first mining bill of the Kast administration, eliminating the progressive patent and deferring the 2026 payment, a signal of relief for the sector that nonetheless does not resolve the underlying issue: mining investment has accumulated years of lag, and its recovery will show up in production only in 2027 and beyond.

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