June's factory bounce masks Chile's structural slowdown—copper rebound, not recovery.

The Chilean peso strengthened by $7 on Monday to close at $925.25, its strongest level against the dollar since July 10, and the IPSA broke above 11,000 points, buoyed by Latam Airlines and Falabella — a confluence of signals that captures the central tension defining Chile's economy at this juncture: activity data beating expectations, but which analysts themselves caution should not be read as a structural turnaround.

June's Imacec posted a 2.4% year-on-year gain, above the market consensus of 1.8%, and enough for the economy to technically dodge a recession, given that seasonally adjusted GDP expanded 0.3% from the prior quarter. Yet the first half closed with a contraction of 0.2%, the first semi-annual decline since the 2020 pandemic. It is in that context that the read on the data becomes most revealing: June's rebound is largely explained by statistical and base-effect factors, particularly the El Teniente collapse a year ago, which artificially depressed the reference figure. Mining grew 9.8% year-on-year in the month, according to the Central Bank, while commerce contributed a 5.4% expansion. Copper traded in London rose 0.4% on the session, alongside a 5% drop in Brent crude, in part on optimism surrounding talks between the United States and Iran.

Economists' reactions laid bare the underlying fragility. Daniel Velandia, chief economist at Credicorp Capital, announced he would cut his growth projection for the year from 1.7% to 1.1%, arguing that the first-half decline makes it mathematically very difficult to reach higher numbers. "It is not normal that in the absence of a global crisis, a country sees a drop of between 1.5 and 2 percentage points in its projection in the space of six months," Velandia told La Tercera, noting that Chile is among the countries most affected by the rise in global tariffs. Market consensus is now moving below 1.5% for the full year. Producer trade groups — mining, commerce, industry and construction — welcomed the rebound but warned that the second half depends heavily on the effective implementation of the reconstruction and economic reactivation law, whose final passage remains snarled in Congress.

That bill is precisely where fiscal policy grows complicated. The government of President José Antonio Kast has decided to veto three articles approved by the opposition with dissident votes from the ruling coalition: the right to financial oblivion on debts, the prohibition on anatocism, and 30-day payment terms for SMEs. Bi-minister Claudio Alvarado confirmed that the vetoes would be submitted on Wednesday, but parliamentary dynamics make it likely their resolution will be pushed back by weeks. Fiscal execution itself is showing its seams: the Treasury froze public transport works worth US$400 million in the Biobío region, halting the award to Grupo Azvi of the Ruta 160 corridors and the Concepción-Talcahuano Highway, in what Diario Financiero describes as part of a cash adjustment on the concessions front. At the same time, the fiscal cash position closed June at US$3.771 billion, a level above the average of the last three years and implying a 500% jump from the US$597 million recorded in the first quarter, according to Budget Office data.

Tariff tensions with the United States add another layer of uncertainty. The 12.5% surcharge Washington imposed on Chilean products — including salmon, fruit, wine and wood derivatives — since July 24 has drawn heated statements from Agriculture Minister Jaime Campos, who dismissed the U.S. rationale as a "pretext" and the measure as "arbitrary." Ambassador Brandon Judd fired back with a public warning: "provocative" comments from ministers who are not party to the negotiations can hamper the work of those actually leading them. It is an episode that illustrates the risk that diplomatic tension could complicate trade arrangements at a moment when the export sector — wines, fruit, seafood — is already facing margin pressure.

The impact reads directly in the results of Concha y Toro, whose shares trade on the Santiago Stock Exchange and whose ADRs trade on the U.S. OTC market under the symbol VCHTY. The winery reported a 14% drop in cumulative first-half earnings, with sales down 6.2%, hit by lower volumes, peso appreciation and the specific blow of weaker U.S. sales. In the second quarter alone, earnings rose just 2.1% to $19.407 billion, in what CEO Eduardo Guilisasti described as a "meaningful improvement" versus the first quarter, though he acknowledged a "challenging" global environment.

At the opposite end of the corporate earnings spectrum, Entel delivered solid numbers that contrast with the subdued macro backdrop. The company, controlled by the Hurtado and Matte groups, reported earnings of $53.659 billion in the first half, up 29% year-on-year, with consolidated revenues growing 7% to $1,556.114 billion. The engine was postpaid customer growth in Chile and Peru — the latter market now accounting for 36% of the firm's ordinary revenues — and the expansion of the residential fiber-optic service under the Entel Hogar brand. In the second quarter specifically, earnings rose 39.4%. It is one of the few genuine, non-statistical growth stories the session had to offer.

Also in telecoms, though in the opposite direction, Subtel ordered the full collection of guarantees from Wom worth UF 316,410 — more than $12.9 billion — over serious breaches in the rollout of the National Fiber Optic project, which the company won with a state subsidy of over $52 billion in 2020. The breaches affect multiple macro-zones, from Arica and Parinacota down to the South Central area, and add another chapter to Wom's institutional deterioration, as the company is already navigating a financial restructuring.

The week ahead will be decisive for the local equity market. Latam Airlines, whose shares trade on the Santiago Stock Exchange, convened an extraordinary shareholders' meeting on Monday that approved a share buyback program of up to 5% of capital — equivalent to 28.71 billion shares, valued at current prices at around US$671 million — with a five-year term. The signal is clear: the airline, which completed its Chapter 11 reorganization in 2022, considers that its shares are trading below intrinsic value. Also reporting this week will be Cencosud and the main compan