Chile's fiscal fragility threatens corporate tax cuts amid peso collapse and credit warnings

The Chilean peso closed the week at its weakest level in three months, breaching $920 per dollar after eight consecutive sessions of depreciation — the greenback's longest winning streak since 2018 — while the local bourse fell 1.2% on the week and a steeper 3.4% in dollar terms. The paradox is striking: copper recovered ground, short-term U.S. rates eased and oil retreated, yet the IPSA could not escape an environment defined by fiscal uncertainty, domestic political turbulence and credit warning signals emanating from New York.

Moody's cautioned this week that Chile has a narrower fiscal cushion than its comparable peers, stressing that rebuilding budgetary buffers and keeping public debt in check are essential conditions for preserving the country's credit quality. The message arrives at a moment when the Autonomous Fiscal Council itself, as its chair Paula Benavides explained, ruled out arithmetic inconsistencies in the previous administration's debt projections, while acknowledging that the assumptions underlying those figures have historically not been made transparent enough. Finance Minister Jorge Quiroz insists there is a calculation error, and the controversy, far from being settled, illustrates the fragility of dialogue between the Executive and the technical bodies in a year when public finances sit at the center of the debate.

That debate reached its loudest legislative expression this week with the Senate's approval, by 26 votes — the bare government minimum — of the general framework of the National Reconstruction bill, the so-called mega-reform whose centerpiece is cutting the first-category corporate tax from 27% to 23% without explicit revenue offsets. Not a single opposition vote backed the initiative. As La Tercera reported, attempts at a deal between La Moneda and the Socialismo Democrático bloc collapsed under circumstances bordering on the anecdotal — a meeting that started poorly when Senator Beatriz Sánchez walked out upon seeing the table set for lunch — but which reflected something deeper: the ideological gap between a government seeking to hand economic initiative to the private sector and an opposition that conditions any tax cut on offsets the Executive flatly rejects. Dipres is working in parallel on a review of the investment plans of state-owned enterprises, aiming to quantify the direct and indirect fiscal burden they represent, suggesting that public spending adjustment will be a complementary track to the tax reform.

SOFOFA, which unveiled its labor reactivation agenda this week, puts the potential impact of the corporate tax cut at a minimum of 80,800 additional direct jobs over four years, with optimistic scenarios topping 330,000. The industrial guild warns that investing in Chile "has become too expensive and complex," and proposes reforms ranging from universal severance through individual accounts to universal access to childcare. Pressure from the private sector on Congress is explicit and coordinated, and will find its next moment of truth when the Senate begins the article-by-article debate on the mega-reform.

On the external front, exporters across sectors — fruit, salmon, wine, timber — met with the Undersecretary for International Economic Relations, Paula Estévez, to fine-tune a joint strategy in the face of the threat of new U.S. tariffs. It is a risk layered on top of currency pressure: a weaker peso theoretically improves export competitiveness, but raises the cost of imported inputs and erodes margins in sectors with dollarized costs. The salmon industry, for its part, mobilized more than $4.2 billion in investments aimed at clean production, a signal that some sectors are betting on the long term regardless of short-term noise.

On the corporate front, Cencosud dominated the week with regional expansion at an unusually rapid clip: just two days after closing the purchase of the St. Marche chain in Brazil, the Paulmann family holding announced the acquisition of 100% of Makro Supermayorista in Colombia for roughly US$158 million, financed entirely with its own resources. The wholesale bet across Latin America consolidates a diversification strategy that contrasts with the cautious investment mood prevailing in the domestic market. In the fintech ecosystem, Krealo — the investment arm of Credicorp — closed a US$5.2 million seed round in a digital factoring platform founded by a Xepelin co-founder, which already books US$8.4 million in revenue and is preparing its expansion into Peru and Colombia. And at Sonda, CFO Gonzalo Soto defended to Diario Financiero the technology firm's largest investment plan in more than a decade — including its first capital increase in 14 years — after two consecutive years of declining earnings.

The week ahead will pile several fronts on top of one another. On Tuesday, the Senate will vote on the constitutional impeachment against former Finance Minister Nicolás Grau, whose defeat in the upper chamber appears priced in but whose process has strained relations within the governing right. More decisive for markets will be the pace of negotiations during the article-by-article debate on the mega-reform: whether the government manages to pick up any opposition vote without yielding on the core ideas of the project, or whether it deepens the bare-majority logic that Moody's and the fiscal technicians themselves are watching with mounting unease. With the exchange rate at three-month highs and the rating agency warning about the limits of Chile's fiscal space, the room for trial-and-error policymaking is narrowing.