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JP Morgan: Investors See Chile Returning to a Disciplined, Predictable Path Anchored in Institutional Stability

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Ahead of the presidential runoff, JP Morgan states that markets have responded positively to the possibility of the next government adopting an economic agenda more focused on fiscal discipline, institutional continuity, and a pragmatic approach to investment.

The scenario following the first round, with a strengthening of center and right-wing forces, has raised expectations for political certainty. JP Morgan maintains that the market is valuing signs of governability and macroeconomic consistency over ideological identities.

The Chilean peso has recorded a rebound, driven by perceptions of stability and the potential revival of capital inflows.

José Antonio Kast, representing the conservative right, emerges as the favorite after achieving a significant percentage of votes in the first round.

"Kast's 24% is reinforced by the results of libertarian and center-right blocs, which together exceed 50%, creating a natural governing coalition," the report states. This has heightened expectations that the next government will be more predictable and disciplined, generating a favorable environment in the markets.

What is at Stake for Chile?The report suggests that the next government will inherit a context of weak growth, a cooling labor market, and a fiscal framework requiring consolidation after years of pandemic-related expansion.

Additionally, the impact of fiscal austerity policies and structural adjustments will be crucial in determining whether the country can maintain its macroeconomic stability without triggering social or political setbacks.

In this context, investors will be attentive to the first signals from the administration resulting from the runoff, seeking guarantees of continuity in economic stability policies and market openness.

Challenges in the Rest of the Region.The JP Morgan document not only analyzes Chile's situation but also provides a Latin American perspective. It highlights that the region is undergoing political recalibration, which could alter growth prospects in various countries.

Brazilis experiencing a moderate economic recovery but continues to face significant obstacles, such as the need for labor and fiscal reforms. Although growth persists, progress on key reforms is slow, limiting long-term prospects.

Argentinais immersed in a restructuring process under the leadership of Javier Milei. While the government has a mandate to implement reforms, high inflation and external debt remain fundamental challenges.

Mexicofaces an economic slowdown and recession risk. Lack of investment and weaknesses in key sectors are affecting growth. Restrictive monetary policy is beginning to show signs of exhaustion, and the country will need to find new sources of growth.

Colombiamaintains solid growth driven by domestic consumption but faces challenges in managing external imbalances. Inflation and public debt are areas that could jeopardize its long-term stability.

Growth.GDP projections for 2025 reflect this disparity: Chile 2.4%; Brazil 2.1%; Colombia 2.7%; Peru 3.3%; Argentina 4.0% following a negative 2024; Mexico 1.3%; and Uruguay 2.4%. The report emphasizes that, beyond the electoral cycle, the region faces a common task: recovering productivity, strengthening institutions, and maintaining consistent fiscal policies.

Source:Ex-Ante