Chile's Fiscal Squeeze Meets Private Sector Expansion as Peso Weakens

The Chilean peso ended the week at its weakest level since March, breaching $920 per dollar after eight consecutive sessions of depreciation — the longest losing streak since 2018 — in a sign that markets are pricing in a buildup of domestic vulnerabilities that neither a copper rebound nor the easing of short-term rates in the United States managed to offset. The IPSA closed Friday with a second straight session of gains, lifted by Latam amid the slide in oil prices, but the weekly tally was a 1.2% loss in pesos and a 3.4% drop in dollar terms: a snapshot that captures the local market's mood with precision.

The fiscal backdrop compounds the reading. Moody's warned this week that Chile has a narrower fiscal margin than its similarly rated peers, stressing that rebuilding budget buffers and keeping the public debt burden low are essential conditions for preserving the country's credit quality. The signal lands at a moment when the government faces contingent liabilities of growing visibility. Energy Minister Rincón publicly acknowledged she will need to meet with Finance Minister Quiroz to address ENAP's financial crisis, while a bill aimed at settling the accumulated debt with power distributors is advancing in parallel. The Budget Office (Dipres), for its part, has begun standardizing criteria to evaluate state-owned enterprises' investment plans, seeking to quantify what direct or indirect fiscal burden they represent for the treasury — a diagnosis that, depending on its findings, could pave the way for sweeping restructuring decisions. In parallel, the government launched its plan to sell public real estate: an initial package of 350 properties concentrated in the Metropolitana, Antofagasta, Bío Bío and Tarapacá regions will be put out to tender by late 2026, while the undersecretariat of Economy is working on an identified universe of 634 assets.

The pressure on public accounts coexists with trade tensions that the export sector is watching with growing concern. Representatives from Sofofa, Frutas de Chile, SalmonChile, Chilealimentos, Vinos de Chile and Corma met with the undersecretary for International Economic Relations, Paula Estévez, to fine-tune a coordinated strategy in the face of the threat of new US tariffs on Chilean exports. The meeting reflects the urgency: Chile, whose export-driven economy depends on preferential access to developed markets, cannot afford improvisation in the face of an administration in Washington willing to use tariffs as a permanent bargaining tool. At the same time, Sofofa revived its Chile-Peru Business Council, dormant for more than three years, on the occasion of the 20th anniversary of the bilateral free trade agreement, underscoring the business community's interest in diversifying and deepening regional ties in a more volatile geopolitical environment.

While the government wrestles with its constraints, the private sector is showing striking vitality. The M&A market posted its best first half in three years, with 65 transactions worth nearly US$2.9 billion according to PwC, and Cencosud led the week with two regional acquisitions in five days: Brazil's St. Marche chain and, in a move announced this Friday, 100% of Makro Supermayorista in Colombia for approximately US$158 million, fully financed with its own resources. Analysts read in these purchases the expression of a structural shift in Latin American retail, away from growth via store openings and toward format consolidation and the pursuit of operational efficiency. In tech, Sonda is defending its largest investment plan in more than a decade — anchored by a capital increase, the first in fourteen years — while its CFO, Gonzalo Soto, concedes that the company is dragging two consecutive years of declining earnings and a restructuring that hit its businesses in Brazil and the Southern Cone. CMPC, in turn, has reworked the timeline for securing environmental permits for its Natureza pulp megaproject in Brazil, with a US$4.6 billion investment at stake: the preliminary license, previously expected in May, is now projected for early August, according to statements by the head of CMPC Celulosa in Brazil to the Porto Alegre daily O Sul.

On the regulatory front, the CMF canceled the registration of Frontal Trust and 16 other entities from the registry of financial service providers for non-compliance with the Fintech Law, in the first show of supervisory muscle under the new regulatory framework. The action sets a precedent on how seriously the regulator will enforce the legislation's standards.

Next week will test several fronts simultaneously. Legislative progress on the energy debt bill and the talks between Minister Rincón and Minister Quiroz over ENAP will offer the first signal on the government's willingness to contain its most pressing liabilities. Exporters will continue calibrating their stance toward Washington. And the FX market, which has built up pressure that is difficult to attribute to any single factor, will be watching closely for any signal from the Central Bank on how the depreciation is feeding into its inflation projections. With Moody's reminding investors that fiscal space is tight and the peso under pressure, the recovery narrative the government wants to install will have to be backed by concrete facts, not expectations.