Chile: IMF Backs Kast Agenda, Sees 3% Growth Path

The International Monetary Fund (IMF) expressed enthusiasm for Chile's economic plan, projecting medium-term growth near 3% a year. IMF mission chief Bikas Joshi credited this forecast to two key factors working in tandem: a temporary slowdown in copper production and the successful implementation of President Sebastian Kast's reform package.

The IMF's earlier growth projections of between 0.25% and 0.75% for this year reflect a sharp deceleration from previous estimates. Joshi emphasized that the current slowdown is temporary, not structural, attributing it directly to a decline in copper production rather than weakening demand or policy missteps. Copper prices are a critical factor in the IMF's assessment, as the metal recently hit a record above US$14,500 per tonne, up roughly 18% this year alone.

Joshi advised Chile to use this favorable period to bolster fiscal and external reserves, using the exchange rate to absorb shocks rather than increasing spending. The IMF endorsed Kast's agenda, which combines tax cuts, deregulation, and reduced public spending, describing the measures as complementary rather than opposed. However, the 3% growth forecast heavily depends on copper prices remaining elevated and Kast's reforms passing Congress with minimal opposition.

The IMF cautioned that neither of these conditions is entirely within the government's control, expressing the 3% figure as achievable "if" both conditions hold. While the IMF maintains a stance of fiscal consolidation, it now praises the government's regulatory reform efforts, particularly permit-streamlining. The National Reconstruction Plan, Chile's reform package, aims to cut the corporate tax rate from 27% to 23%, introduce an employment tax credit, and streamline permitting procedures for new investments.