Chile's jobless duration hits record high as political crisis deepens confidence collapse.

President José Antonio Kast's approval rating fell this week to its lowest level since the start of his government —26% according to Cadem's Plaza Pública survey, with disapproval climbing to 69%— and while the political crisis triggered by the reduction of sentences for those convicted of sexual offenses dominates public attention, the economic data that circulated simultaneously paints an equally troubling picture: unemployment stands at 9.8%, equivalent to more than one million people out of work, with an average unemployment duration of 8.2 months, the highest on record. The coincidence is no accident. Chile today faces a dual erosion of confidence —in its political institutions and in its capacity to generate employment— that feeds on itself and that no reform agenda has managed to interrupt.

The labor market is the Gordian knot. Sebastián Cerda, economist and partner at Econsult, warned this week that the current level of unemployment has structural rather than cyclical features, pointing to the sustained rise in labor costs as the determining factor. His outlook for 2027 is bleak: a complex year in which additional negative shocks could drag down an economy already navigating shallow waters. That view contrasts with the projections from the Finance Ministry, which anticipates growth of 3.3% for next year, a number the Central Bank places in a more conservative range of between 2% and 3%. The difference is not trivial: it implies that a meaningful portion of official optimism rests on assumptions the market does not share. At last week's Enade, Kast himself challenged business leaders to activate their investment agenda, but SOFOFA responded with concrete figures: projects currently in environmental evaluation would allow the unemployment rate to fall from 9.6% to 8% if cleared, a promise conditioned on processing timelines that in some regions stretch back to 2019.

The construction industry precisely reflects that paradox. Home sales in the Metropolitan Region fell 10% in the third quarter versus the same period last year, according to figures from the Cámara Chilena de la Construcción, although the trade association is quick to point out that the data reflects an exceptionally high comparison base: the third quarter of 2025 was the first with the mortgage rate subsidy for homes up to 4,000 UF in full effect, which concentrated sales artificially. From a medium-term perspective, the sector continues to operate well below the average of 23,570 units sold in the first three quarters that characterized the 2010-2021 period, versus 18,899 this year. The extension of the subsidy to 6,000 UF and the approval of the Reconstruction Law in August provided some marginal lift, but not enough to speak of a recovery. In that context, Cencosud moved forward with its new mall project in Puente Alto —a US$30 million investment on land of the Hacienda El Peñón— after receiving a favorable ruling from environmental authorities, a countercyclical bet in a physical retail segment that remains under pressure.

Where the cycle is indeed operating with force is in the new-energy automotive market, driven by the so-called "bencinazo" of March. According to the Asociación Nacional Automotriz de Chile, sales of electric and plug-in hybrid vehicles totaled 14,837 units between January and September 2026, a 144.6% jump versus the prior year and an all-time record for the period. The segment already represents 6.3% of the light and medium vehicle market, more than double the 2.8% recorded at the end of 2025. With fuel prices projected to remain elevated for at least another year, according to Enap estimates, Anac expects this segment could reach 10% of the market in 2027, an energy transition accelerated by price, not public policy.

In the pension system, the auction of the AFPs' stock of affiliates once again generated noise. A study by MMDV Consultores identified what it called "the winner's paradox": an overly aggressive bid on commissions could massively increase the number of affiliates but simultaneously reduce the revenues of the winning administrator. Only AFP Modelo and AFP Uno would improve their position under the analyzed scenario. System earnings fell 18.2% through September, dragged down by weaker results from the mandatory reserve, although excluding that component and other related investments, operating results increased 5.4%, suggesting that the core business remains profitable but market volatility is punishing reported margins.

That volatility has its own name this week: Brazil. The stock market collapse in the neighboring country, triggered by concerns over fiscal management by the Lula da Silva administration, hit Chilean mutual funds with exposure to that market, a reminder that regional financial integration transmits risks in both directions. The IDB, for its part, estimated the cost of reconstruction for the Coquimbo and Atacama regions following the storms at more than 570 billion pesos, with 67% of resources earmarked for Coquimbo and 91% of the total concentrated in Public Works and Housing. Only 69.5 billion is being executed this year, which foreshadows significant pressure on the budget in subsequent fiscal years.

The coming week will center on the budget discussion for 2027, where the UDI's proposal to cut funding for the Consejo Resolutivo de Asignaciones Parlamentarias to one thousand pesos is the most visible episode of a deeper institutional friction. Alerts about executive control of autonomous bodies —Contraloría, Fiscalía, Servel— through budget provisions will warrant close watching. On the corporate front, succession at CMPC and Banco de Chile will set the tone for boardroom conversations in the coming weeks, while the forestry sector watches attentively to see what leadership profile the Matte family will choose at a moment that, according to those familiar with the company, demands far-reaching decisions about the future of the business.

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