After an election, it is common for quick readings and hasty predictions to emerge. However, to understand how this new cycle may influence the economy and portfolios, we must separate what has indeed become clearer from what remains uncertain.

What we do know (and how this impacts investments)

• A balanced Congress with no clear majorities.

Congress was virtually deadlocked and no agenda can move forward without negotiation. This reduces the risk of abrupt regulatory changes, but increases the likelihood of political inertia.

Therefore, sectors that depend on relatively stable rules -infrastructure, concessions, regulated services- would face less regulatory risk, although they must coexist with slow progress in reforms that could improve productivity.

• A real estate market that was already showing recovery.

More controlled inflation, a gradual return of credit, tight supply and subsidies have been driving the sector. Politics has an influence, but the main driver remains financial.

These factors should continue to have a positive impact on the real estate sector.

• The pension reform enters the implementation stage.

The reform has been approved: now come the operational and governance details. The economy will react to the pace and quality of this implementation, but it should be an orderly transition.

This will affect the way long-term flows move, the stability of domestic savings and the demand for local instruments. These gradual changes may act as an anchor for the capital market, but there will be no abrupt disruptions.

• A country seeking institutional stability.

After intense electoral years, Chile will have almost 30 months without relevant elections. This reduces political uncertainty, allowing investment decisions with somewhat longer horizons and less sensitivity to political events.

What remains uncertain

• A complex international environment: High rates and a lot of geopolitical noise.
• The internal dynamics of the Congress: it will have to be observed whether collaboration or blocking prevails.
• Demanding valuations in the US: a global adjustment would hit Chile regardless of its domestic policy.
• A reduced fiscal margin: any deviation will be observed by markets.

All of these variables could influence asset values. Portfolios with high international exposure should monitor these signals more closely and ask themselves how much risk they are willing to tolerate.

The election tidies up part of the picture, but it does not eliminate uncertainty. The task now is simple: build on what we know, recognize what we don't, and make decisions that will hold up even when the noise rises again.

Vicente Dourthé
Portfolio Manager Private Debt Fynsa AGF