Navigating Chile's Fiscal Crossroads: Political Risks and Opportunities in the 2025 Election Cycle

Chile's 2025 election cycle has crystallized into a high-stakes battle over fiscal policy, with center-right candidate Evelyn Matthei's platform of austerity and fiscal discipline positioning her as a potential game-changer for the country's economic trajectory. As public debt approaches 30% of GDP and inflation lingers above targets, investors must parse how Matthei's proposed policies—ranging from $6 billion in spending cuts to a rethinking of pension reforms—could reshape sectors like copper, infrastructure, and equities. This analysis dissects the risks and opportunities, offering a roadmap for capitalizing on political shifts.

The Fiscal Tightrope: Chile's Current Challenges

Chile's economy faces a delicate balancing act. Despite projected growth of 2–2.5% in 2025, driven by copper exports and services, structural issues loom large. Public debt has crept upward to 29.7% of GDP, prompting the current administration to slash expenditures and aim for a balanced fiscal position by 2027. However, rising crime rates and social unrest have diverted funds toward public safety, exacerbating fiscal strains. Meanwhile, global trade pressures—such as U.S. tariffs on Chilean fruit—threaten non-mineral exports, underscoring the economy's reliance on copper, which accounts for 12% of GDP.