Chile pins fiscal hopes on tax breaks for mega-projects amid wage stagnation.

The data point that shook global markets yesterday landed in Chile with unusual force: U.S. June inflation fell 0.4% month-on-month —its largest decline in more than six years— bringing the annual rate to 3.5%, well below the 3.8% consensus expectation. The effect in Santiago was immediate. The IPSA reclaimed the 11,000-point level at the close, advancing 0.90% with BCI, Vapores and Copec as the main drivers, while the dollar tumbled to an intraday low of $922.7 before moderating the fall and closing around $927.50. Copper joined the move, rising 1.41% to US$6.36 per pound on Comex, extending its winning streak to four consecutive sessions. For Chile, the coincidence of a weak dollar and strong copper is a combination that eases pressure on the peso and improves projected fiscal revenues, though the backdrop remains complex.

That backdrop was laid bare with unusual starkness in the second-quarter Public Finances Report, released past 8 p.m. Tuesday —a strikingly late hour for a document of this kind. The government of José Antonio Kast acknowledged that Chile will not be able to meet its own structural balance targets from 2027 onward in either of the two projected scenarios, neither the base case nor the alternative that incorporates the effects of the omnibus bill. For 2027, a structural deficit of between 2.1% and 2.4% of GDP is projected, against a target of 1.8%. Public debt would exceed 45% of GDP by 2029. According to the Budget Office (Dipres), closing the negative headroom —which fluctuates between 0.2% and 0.5% of GDP— would require adjusting spending by up to one percentage point of output per year between 2027 and 2030. The government qualified that this gap can be closed through a combination of revenues and expenditures, and pointed to 3.7% growth in 2027 if the omnibus legislation is approved. Even so, Agriculture Minister Jaime Campos was blunt in describing the moment: "Are the measures painful? Of course they are."

That very omnibus bill —the Kast administration's most far-reaching reform— enters its final stretch in the Senate this Wednesday, after no agreement was reached to move the vote up to Tuesday. The session will begin at 3:00 p.m. and will run until full dispatch. Among the most debated articles is the tax invariability regime, which was structured into three tranches based on investment size: 10 years for projects between US$50 million and US$100 million, 15 years for the US$100 million to US$350 million tranche, and 20 years for investments equal to or above US$350 million, with a 1.5% surcharge on the first-category corporate tax for those opting into the mechanism. A relevant technical refinement, agreed in the Senate Finance Committee, establishes that the years of invariability will begin to count from the moment the project generates gross income, addressing the concern raised by CPC president Susana Jiménez regarding projects that take years to mature. Once approved in the Senate, the bill will move to a third stage of review in the Chamber of Deputies.

The debate on investment and employment does not end in Congress. This Wednesday the government submitted to the Chamber a bill to make the 40-hour workweek more flexible, which would allow averaging the workweek over a 16-week cycle —up from the current four weeks—, with the possibility of reaching up to 45 hours in exceptional weeks and a cap of 52 hours with overtime, always through a written agreement between employer and worker. The initiative arrives at a moment of growing pressure on the labor market: economist David Bravo, chair of the government's own Labor Reactivation Task Force, called the measures announced so far "very insufficient" to bring down an unemployment rate that has now spent more than 40 months above 8%. SOFOFA, for its part, presented an agenda of five structural reforms that includes replacing severance-by-years-of-service with an individual account, universalizing daycare, and cutting the first-category corporate tax from 27% to 23%, estimating that this last measure alone could generate between 80,800 and 210,000 additional direct jobs over four years.

Operating on top of that labor market are wages that the INE's 2025 Supplementary Income Survey once again portrays in harsh terms. The largest group of workers —those working between 41 and 44 hours per week— earned a median income of $800,000 in 2025, a nominal increase of just 1.4% which, once inflation is discounted, implies a real-terms decline. Half of all employed workers earned $680,000 or less. The median hourly income of that main group barely reaches $4,400. Economists Gonzalo Durán and Marco Kremerman, of Fundación SOL, warned that the figures "portray with rawness the insufficiency of labor incomes in Chile."

In the energy sector, ENAP announced a US$648 million investment in Magallanes to expand hydrocarbon exploration and production through fracking and horizontal drilling, in line with its strategic plan to 2040. The largest project, worth US$552 million, will be submitted in the coming days to the SEIA environmental review system for the Dorado-Riquelme and Manzano zones. The decision is significant in a context in which Brent crude has climbed to US$85.37 per barrel —a 2.48% gain— on the intensification of the Middle East conflict and the naval blockade in the Strait of Hormuz, factors that strain the energy cost of the Chilean economy and reinforce the strategic argument behind ENAP's bet. In parallel, Chile's fintech ecosystem consolidated its expansion: according to a FinteChile report, the sector grew 15% in 2025 and more than half of its firms already operate outside Chile, with one in four moving more than US$500 million annually.

What remains to be resolved in the coming hours and days is dense. The Senate vote on the omnibus bill will determine whether the alternative fiscal scenario —with higher projected growth— has any chance of materializing. The magnitude of the frontal weather system approaching from Thursday onward will test the public-private coordination activated among the Ministry of Mining, Sernageomin, Codelco, Antofagasta Minerals and Teck, which are compiling an inventory of infrastructure and heavy machinery available for emergencies. And in Washington, the market will be watching to see whether the June inflation print is suffic