BofA Sees Chile’s GDP Accelerating to 3% on Reconstruction Drive

Chile

Bank of America has projected that Chile GDP growth will accelerate to 3% in 2027, betting that a sweeping pro-growth reform package and sustained high copper prices will unlock a powerful investment cycle after a sluggish 2026.

The BofA Call: A Reform-Driven Rebound

In a recent note titled “Chile: Pro‑growth bill and monetary policy”, Bank of America economists led by Sebastián Rondeau laid out a baseline where GDP expands by just 1.4% in 2026 before jumping to 3% the following year. The report identifies a “mega” pro‑growth bill fast‑tracked through Congress as the catalyst, arguing it will “support investment” by cutting the corporate income tax to 22% by 2029 at a lower fiscal cost than initially feared.

This legislative push forms the core of President José Antonio Kast’s National Reconstruction Plan, unveiled in mid‑April 2026. The package bundles fiscal mobilisation, regulatory streamlining and investment incentives designed to re‑anchor medium‑term growth near 4% and expand formal employment.

For markets, the significance lies in the sequencing. BofA is effectively telling investors that 2026 is a year of political execution and cautious monetary policy, while 2027 is when the dividends of reform begin to materialise in corporate earnings and credit growth.

Where BofA Sits in the Consensus

BofA’s 3% GDP forecast for 2027 places it at the upper end of mainstream projections, but it is not an outlier. Allianz Trade also sees 3% growth that year, while the International Monetary Fund’s upside scenario—which assumes copper stays near US$5.5–6.0 per pound and reconstruction reforms pass—delivers roughly the same number annually through 2030.

The Central Bank of Chile’s own June 2026 range of 2.0–3.0% for 2027 comfortably accommodates BofA’s call. For 2026, however, the American bank’s 1.4% estimate is notably more conservative than the IMF’s 2.2% and the World Bank’s 2.6%, suggesting Wall Street is pricing in a short‑term soft patch before the reform payoff arrives.

This divergence creates a clear narrative for international investors: near‑term caution is warranted, but the medium‑term risk‑reward in Chilean assets is tilting positive if the Kast administration delivers on its legislative promises.

Monetary Policy: A Pivot, Not a New Easing Cycle

Chile’s central bank has already executed one of the most aggressive easing cycles among emerging markets, slashing the policy rate from a peak of 11.25% in October 2022 to the current 4.50%. With headline inflation falling to 2.4% year‑on‑year in February 2026—the first sub‑3% reading since early 2021—the disinflation story is largely complete.

BofA expects no further cuts for the remainder of 2026, even as a fuel‑price shock ripples through the economy. Instead, it projects two 25‑basis‑point hikes in 2027, lifting the rate to 5.0% as domestic demand recovers and reconstruction spending feeds into higher capacity utilisation.

For fixed‑income investors, this trajectory offers a real‑rate cushion once inflation settles near the 3% target. The prospect of mild re‑tightening also supports currency stability, making Chilean peso‑denominated sovereign debt an attractive carry trade in a world where many developed‑market central banks are cutting rates.

Copper, Lithium and Geopolitical Leverage

No discussion of Chile GDP growth is complete without acknowledging the country’s dominant position in global copper markets. The IMF’s 2026 Article IV staff statement calculates that more than half of the additional growth impulse in its upside scenario comes directly from elevated copper prices, which have been buoyed by the energy transition and supply constraints in competing jurisdictions.

Chile’s reconstruction plan explicitly ties infrastructure and energy investment to mining expansion, doubling down on copper as a national lever of power. J.P. Morgan notes that US tariffs on copper largely exempt the products Chile exports, giving the country a relative advantage over peers facing trade friction.

Lithium policy remains a wildcard. BofA has previously flagged ongoing discussions around mining royalties and the role of state‑owned enterprises as a source of residual uncertainty for foreign investors. The pro‑growth thesis implicitly assumes a relatively investor‑friendly outcome that encourages private capital into the battery supply chain, where Chile competes directly with Argentina and Bolivia.

The Read‑Through for Outside Investors and Expats

For an internationally‑minded audience, Chile is re‑emerging as a “quality EM” carry‑plus‑growth play. The combination of institutional strength, a credible central bank, and a reform‑minded government creates a rare alignment of political will and macroeconomic stability in Latin America.

Equity investors will likely focus on mining and metals for direct copper leverage, construction and infrastructure for reconstruction spending, and financials as loan growth returns. Scotiabank reports that GDP was already running at 3.6% year‑on‑year in early 2026, with capital goods imports surging 25%, suggesting that private investment is beginning to front‑run the reform agenda.

For expatriates and professionals considering relocation, the macro story translates into a strengthening peso, rising real wages, and expanding formal employment. Allianz Trade expects the fiscal deficit to narrow to about 1.0% of GDP in 2026, with public debt stabilising near 40% of GDP—levels that preserve fiscal space for social spending and infrastructure without threatening credit ratings.

What to Watch Next

The immediate test for BofA’s thesis is the legislative progress of the pro‑growth bill through Congress. Any significant dilution of the corporate tax cut or regulatory streamlining would force a reassessment of the 2027 growth trajectory.

Copper price movements remain the single largest exogenous variable. A sustained drop below US$5.0 per pound would erode the fiscal revenue base that underpins reconstruction spending, while a rally above US$6.0 would likely accelerate the investment cycle beyond BofA’s current projections.

Finally, the lithium policy framework deserves close attention. Clear rules on concessions, royalties and foreign participation would remove a key overhang on mining sector valuations and could unlock a second wave of FDI that extends Chile’s growth runway well beyond 2027.

Frequently Asked Questions

Why does Bank of America expect Chile’s growth to accelerate to 3% in 2027?

BofA’s forecast is built on the expected passage of a “mega” pro‑growth reform bill that cuts corporate income tax to 22% by 2029 and streamlines regulation. The bank believes this package, combined with elevated copper prices, will unlock a significant investment cycle that lifts GDP from a subdued 1.4% in 2026 to 3% the following year.

What does the reconstruction plan mean for foreign investors in Chile?

The National Reconstruction Plan signals a shift toward a more investor‑friendly policy framework under President Kast, with lower corporate taxes and targeted spending on infrastructure and energy. For foreign investors, this creates opportunities in mining, construction and financial services, while the stable fiscal outlook and independent central bank reduce sovereign risk relative to other emerging markets.

How do copper prices affect Chile’s economic outlook?

Copper is Chile’s most important export and a major source of fiscal revenue. The IMF estimates that more than half of the additional growth impulse in its upside scenario comes from copper prices in the US$5.5–6.0 per pound range, making the metal’s trajectory the single most important external variable for the country’s GDP, currency and public finances.

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