PPD's Tax Deal Unravels Opposition, Secures Kast's Investment Blueprint

The agreement that the PPD sealed yesterday with Finance Minister Jorge Quiroz on the tax invariability clauses of the mega-reform is the political hinge of the day: with a single move, the party dismantled the opposition's strategy of appealing to the Constitutional Court, unlocked the centerpiece of the José Antonio Kast administration's investment bill, and generated a visible fracture within the very center-left coalition that governed Chile for the past decade. DC Senator Iván Flores called his PPD colleagues "sellouts," Frente Amplio Senator Beatriz Sánchez lamented the deal in harsh terms, and fellow Frente Amplio member Diego Ibáñez branded it "terrible." But the fait accompli is that the Executive got what it needed: legal certainty for investors and a text that, though trimmed relative to the original proposal, preserves its structural logic.

The agreement modifies the invariability schedule significantly. The original bill contemplated 25 years for investments above 50 million dollars. The negotiated text reduces that horizon to ten years for projects of up to one hundred million, fifteen for those up to 350 million, and maintains twenty years for investments above 500 million, all with a 1.5% corporate surcharge for those who opt into the regime. Foreign Minister Francisco Pérez Mackenna, who is simultaneously leading Chile's defense before the USTR in Washington, stressed that there are "solid arguments" for the United States to rule out trade restrictions against the country, contending that several American companies view the reconstruction bill favorably as a facilitator of foreign investment. The coincidence of both negotiations on the same day is no accident: the government is simultaneously building a narrative of openness to private capital on both the domestic legislative front and the external diplomatic one.

The urgency of that message becomes more comprehensible when reading the IMF report published this week. The organization warns that, in its baseline scenario, Chilean public debt will exceed the prudential limit of 45% of GDP in 2028 and will stabilize around 50% in 2033, reaching 48.4% by the end of the current administration. To respect the debt ceiling that the government itself has set, the IMF estimates that additional measures equivalent to roughly one point of GDP would be needed, and only under favorable conditions — a persistently high copper price and accelerated growth — would the 45% threshold hold without further adjustments. It is precisely in this context that the copper price takes on a dimension that goes beyond markets: benchmark Comex copper was up 2.11% to $6.23 per pound at the market open, a figure that provides fiscal oxygen, but whose sustainability the IMF itself conditions on scenarios it labels as favorable, not baseline.

Markets, meanwhile, traded under the crossfire of geopolitics and the domestic inflation surprise. The dollar closed on the verge of a fresh yearly high, driven by the collapse of the ceasefire between the United States and Iran. Brent crude jumped more than 8% in the previous session to $80.59 per barrel — its biggest daily gain since mid-March — before partially correcting the following day toward $78.67. The Santiago Exchange closed in the red alongside Wall Street, while the Fed minutes revealed board members divided on whether to raise or cut the rate, adding another layer of uncertainty to a market already absorbing the June CPI.

And that inflation print matters especially. The June consumer price index came in at 0%, but that zero was above market expectations, which had anticipated a negative reading. Annual inflation accelerated from 3.9% to 4.3%, its highest level since September 2025, driven in part by an unfavorable base effect. Andrés Sansone, chief economist at Santander, noted on the program *DF al Cierre* that he maintains his year-end projection somewhat below 4%, but the upside surprise has already led most analysts to rule out cuts in the Monetary Policy Rate for the remainder of 2026, betting on a caution that the Central Bank itself appears willing to sustain. Energy feeds part of that complexity: the electrical system is operating under tight conditions, generators formally requested a preventive rationing decree at an extraordinary meeting, and although the Chamber of Deputies approved with 89 votes in favor the bill that settles the 816 billion pesos in debt owed to electricity distributors and sent it to the Senate, the supply situation remains an immediate operational risk. Pump fuel prices are falling for the fourth consecutive week — 93 cents for 93-octane gasoline, 155 pesos for diesel — but the rebound in oil prices driven by tensions in the Strait of Hormuz complicates any projection of sustained relief on that front.

On the institutional plane, the Comptroller's Office published Resolution No. 14 replacing preventive controls with ex-post oversight of corporate transactions at Codelco and Enami, requiring both companies to notify each agreement within ten days of its execution. The measure, designed centrally for the world's largest copper producer, seeks to expedite corporate decision-making without abandoning accountability. In parallel, the ministry in charge of state-owned enterprises ordered all state companies to submit financial diagnostics and investment plans by August 30, in what the government describes as a step toward "a more active and demanding owner's perspective."

What to watch closely in the coming days is multiple but convergent: the outcome of the USTR hearings on July 24, where the 12.5% punitive tariff — the highest proposed against any economy in the process — remains unresolved and where the forestry and salmon sectors have filed their submissions with arguments pointing both to the harm to U.S. consumers and to the labor standards of the Chilean export sector; the progress of the electricity bill in the Senate and the potential rationing declaration; and the debate around the MPR in the context of inflation that is not receding as quickly as expected and a copper price that is trading strong but in a geopolitical environment that can reverse with the same speed it did this week.

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**LATAM Airlines (Santiago: LTM)** — The airline called an extraordinary shareholders' meeting for August 3 with the aim of approving a share buyback program of up to 5% of its own stock, extendable for up to five years. Last year the company executed two similar programs totaling 585 million dollars.

**Spora (not listed)** — The Chilean biotech firm specialized in mycology will enter London's luxury retail market