Chile Seeks Recovery as Fiscal Reform and Labor Crisis Collide

Chile is wrapping up the first half of 2026 with an economy that blends encouraging signals from financial markets with structural fragilities that the private sector is no longer willing to overlook. The IPSA is on track to close its worst semester in six years, weighed down by the conflict in the Middle East and global monetary uncertainty, yet the consensus among analysts points to a recovery in the second half — contingent on the convergence of two decisive factors: the passage of the so-called miscellaneous bill and an eventual rate cut by the Federal Reserve.

The international backdrop has been anything but benign. Since the closure of the Strait of Hormuz in February, following the escalation between the United States and Iran, global markets have moved to the rhythm of disruptions in the energy supply chain. Brent crude touched $118 a barrel in late March, but has since retreated more than 40%, trading around $72 after the peace agreement was signed on June 17. The Fed, under Kevin Warsh, held rates in the 3.5% to 3.75% range at its latest meeting but has left the door open to potential hikes, keeping pressure on global equities. Even so, global stocks are heading into one of their best quarters since 2020, and copper — the bellwether of the Chilean economy — has rebounded in tandem with the dollar.

Against that backdrop, Rodrigo Godoy, head of research at Credicorp Capital, projects the IPSA at 12,500 points by year-end, with banks and shopping malls as the main winners of the first half. Markets anticipate GDP growth of around 3% in the second half, a pace that would partly offset the weak start to 2026. Investment is showing signs of reactivation, inflation is receding, and analysts speak of a "renewed tailwind," though caution prevails. Ramón Suárez, partner at Noosa Capital, warned that the market is taking on considerable risk in companies tied to artificial intelligence, trading at lofty valuations whose payoff remains uncertain.

The fiscal and tax debate sits at the center of the political-economic discussion. The mega-reform of the José Antonio Kast administration begins its detailed review in the Senate's Finance Committee next week. Minister Jorge Quiroz claims to have the votes, but the private sector is split between two camps: those who believe constitutional legitimacy is enough to move forward, and those who, like Icare chairman Holger Paulmann, warn that long-term stability requires broader consensus, citing the pension reform experience as a cautionary tale. SOFOFA, for its part, hasn't waited: it has unveiled a labor reform agenda that includes replacing severance pay for years of service with an individual account managed by the AFC funded by a 4.11% contribution, universalizing childcare, and cutting the First Category Tax by four percentage points from the current 27% — a measure the trade group estimates could generate at least 80,800 additional direct jobs over four years. The urgency is well-founded: Chile has now logged 40 consecutive months with unemployment above 8% and ranks as the fourth-highest jobless rate in the OECD.

At the microeconomic level, the tensions are equally telling. Hacienda Chada, linked to the Barros family and carrying $97 million in liabilities, has proposed to its creditors the sale of three productive estates totaling more than 200 hectares to avoid bankruptcy — a sign of the strain on heavily indebted agricultural firms. In concessioned infrastructure, the MOP is weighing whether to terminate the contract for the Talca-Chillán Route operated by China's CRCC or to facilitate its sale, with Banco Santander already holding a mandate for the process. On the pension front, a drop of more than 10% in AFP contributors under the age of 30 over the past decade has raised alarms about the impact on future pensions and the viability of the Social Security system.

By contrast, there are corporate moves pointing in the opposite direction. Pampa Investments — the former Oro Blanco run by Francisca Ponce, daughter of Julio Ponce — is aiming to return to the IPSA after two years off the index, having hired Banchile as a market maker to boost liquidity. Cencosud closed the purchase of 100% of Makro Supermayorista in Colombia just days after announcing the acquisition of Brazilian chain St. Marche, consolidating its regional expansion. Sonda launched the largest investment plan in its history, with a capital increase that is its first in 14 years. And Krealo, Credicorp's venture arm, led the $5.2 million seed round of a digital factoring fintech founded by a co-founder of Xepelin, already preparing its expansion into Peru and Colombia.

Next week will be decisive on several fronts at once. The start of the detailed debate on the mega-reform in the Senate will set the political tone for the second half and determine whether private investment finally takes off or regulatory uncertainty drags on. The INE's employment figures for the March-May quarter will deliver the first concrete read on the labor market under the Kast administration, in a context where the President himself has warned of "critical" months ahead and urged business leaders to avoid layoffs. And the Fed's moves will continue to be closely watched from Santiago, knowing that any signal of a rate hike could derail the optimism with which Chilean markets are hoping to close out the semester.