The impossible recession

"Once you eliminate the impossible, whatever remains, however improbable, must be the truth." Sherlock Holmes, The Sign of the Four (1890). If any of us had been asked a couple of years ago whether copper could reach above US$6 a pound, we would have answered that it was improbable. But if they had added that, at those prices, Chile would be in a technical recession, as Minister Quiroz acknowledged on Bloomberg, the answer would have been a resounding and unanimous: "impossible." And that is exactly what is happening. How can something so strange, so detached from our historical reality, occur? We will try to shed some light on this mystery. Although mining, directly, represents only between 10% and 13% of the economy, depending on the year, it has always determined our destiny. The reason for this is the "contagion effect." If mining is doing well, it shows up in the numbers by its own weight. But, more importantly, its effect is amplified throughout the rest of the economy. To paint it in a picture: good wages in Antofagasta make people consume more, travel more, buy cars. First in Antofagasta and then throughout the country. Investment and consumption are energized. The Government collects more taxes, more contributions from Codelco. It can increase its spending. This mechanism determined a close correlation between the price of copper and GDP (which the Imacec attempts to estimate). If copper was doing well, Chile was doing well. That correlation today seems broken. The Imacec figures have been anemic. The cumulative figure for 2026 is −0.4%, with seven negative months and two positive ones. To try to understand what is happening, let us review its composition, separating the mining and non-mining components. Mining, the great culprit according to the figures, has fallen practically every month, with a brutal August and September, at −17.4% and −12.1%, respectively. These drops, as can be inferred from such extreme numbers, are largely explained by one-off factors, such as maintenance at large deposits and the suspension of operations at El Teniente. There are also structural elements. For years, mining was the icon of "the extractivist economy that had to be overcome." Projects were obstructed. Permits were dragged out. It became filled with regulations that lowered productivity while ore grades fell. On the non-mining side, the September Imacec shows an upward trend that had been observed more timidly in previous months: the non-mining sector is recovering. It was on the rise, fell with the storms, and since then has been going from less to more: 1.4% in August and 2.0% in September, with commerce and industry each growing 4.5%. This aligns well with the "contagion effect" we mentioned above. Let us return, then, to the initial question. How is it possible that the economy is not advancing if copper keeps breaking records, driven by the AI boom (now at risk due to the affairs of Mr. Huang, the man in the leather jacket) and electromobility? The answer lies in what the Imacec actually measures. It, like GDP, looks at what happens with production at constant prices. That is, it isolates the price effect to show only the change in the quantity produced. Although it is the most widely used indicator for measuring activity, one must keep in mind how it works before drawing sweeping conclusions: a high copper price, which has risen by around 40%, to US$6.15 a pound on average this year, appears nowhere in the Imacec. The real economy, however, is not made only of quantities (Q), but of income, which is price times quantity (P×Q). If we do the exercise of multiplying — we produced 12% less in September, but 40% more expensive — the picture changes completely: 0.88 in quantity times 1.40 in price gives 23% more in value than last year. The figures broadly confirm our back-of-the-envelope calculation: according to Subrei, copper exports grew 18.7% in dollars between January and September, despite the fact that we produced less. An alternative indicator does capture the price effect, both the rise in copper and in oil. The Central Bank measures it. It is called real Gross National Disposable Income. Unlike the Imacec and GDP, it incorporates terms-of-trade movements. In the first quarter of 2026, while GDP fell 0.3%, real disposable national income grew 4.3%. In the second, GDP fell 0.2% and income grew 1.3%. In a year of volatility like this one, it is a key indicator that almost no one has looked at. Mystery solved, dear Watson. Once you eliminate the impossible, what remains is the truth: copper did not stop mattering; it is simply that the Imacec does not reflect it. Neither does GDP. The correlation is not broken, but hidden in prices. This is not a reflection to console ourselves with. We are in a technical recession. But, as Livy said, it is in adversity that things show their worst face. Reality is less bad than it appears. And the future should be better. The greatest investment boom in human history is happening now. Before our eyes. Its fruits will reach us. Sooner rather than later. *The author of the column is an entrepreneur and panelist on Información Privilegiada on radio Duna.