Chilean companies expected to moderate growth plans, Fitch says

Chilean companies are expected to temper their growth plans this year as the likelihood of higher taxes and labor costs dim returns on new projects, Fitch Ratings said in a note.

“Fitch expects a more austere 2023 in Chile, as companies will need to moderate strategies in an environment where economic dynamism continues to be affected by persistently high inflation,” Fitch analyst Rodolfo Schmauk wrote. “Tight financial conditions and uncertainty are reducing domestic demand and investment growth.”

The administration of President Gabriel Boric recently pushed through increases in mining taxes and the minimum wage as well as a reduction in the workweek. Debate will begin next month on a pension overhaul and Boric plans to submit a new version of a broad tax reform to fund his social initiatives.

“The recently approved laws and issues on agenda still generate some uncertainty regarding the new level of labor and tax expenses in companies,” Schmauk said in a written response to questions. “The pension reform could also imply a greater burden on companies, and we will probably see some caution in companies to make investment decisions until there is greater visibility.”

(By Eduardo Thomson)