SANTIAGO – Chile’s incoming far-right president, Jose Antonio Kast, inherits a turbulent economy as the Iran war disrupts global markets, undermining the post-election rally that followed his December victory on pledges of growth, deregulation, and spending cuts.
Kast assumes office on Wednesday amid plunging stocks and a weakening peso. His economic team has no immediate contingency plans, a spokesperson confirmed, leaving uncertainty over how the conflict will derail promises of swift fixes for Chileans’ woes.
Political analyst Kenneth Bunker at the University of San Sebastian noted Kast campaigned as an “emergency government” focused on rapid economic expansion. Yet, Bunker warned, priorities like growth may falter amid volatile exchange rates, inflation, and slower expansion, potentially delaying key initiatives.
As the world’s top copper producer and No. 2 lithium supplier, Chile feels every market swing acutely. Copper prices, the nation’s revenue lifeline, surged from under $10,000 per ton in June to $13,618 by late January—each cent adding $27-35 million to treasuries, per outgoing officials. Pre-war forecasts eyed $4 billion in extra windfalls, but volatility struck: an 8% drop from peaks, rebounding to $13,098 by Tuesday.
Oil woes compound the pain for this major Latin American importer lacking domestic supply. Prices neared $120 per barrel post-war outbreak, stoking inflation. Oxford Economics’ Monday report flagged Chile, alongside Central/Eastern Europe and India, for severe hits, with Q2 inflation potentially jumping 0.4-1.7 percentage points in oil-shock scenarios.
Economist Marcela Vera of the University of Santiago stressed Chile’s vulnerability: “Very sensitive to external shocks, geopolitical, military, or market fluctuations.” With minimal financial buffers and heavy reliance on primary exports via free trade pacts, the open model amplifies risks.
Post-election optimism faded fast. The IPSA index, up 65% year-over-year, peaked late January before shedding over 10%. The peso, fortified by copper highs, hit multi-year strength in early February but depreciated 5% since.
Chile’s MEPCO fuel stabilization fund softens oil spikes via three-week cycles, Vera said. Still, prolonged war could trigger chronic damage: not just higher oil, but logistics costs and dollar strength. JPMorgan’s Friday report hiked December inflation forecasts to 3.6%, up 20 basis points with upside risks, as MEPCO tempers but doesn’t erase pass-through effects.