Caution in investment in Chile: bad timing or economic decline?

The recent report from the Central Bank of Chile on business perceptions reveals a troubling reality for the country's economic landscape. Since its inception in 2013, the Business Perceptions Report (IPN) has reflected a climate of caution and pessimism among business executives. This year, the IPN for August 2024 shows that, although many companies expect to close the year with results similar to or slightly better than those of 2023, the lack of significant investment projects remains concerning. This trend is associated with an uncertain economic outlook that stifles growth prospects. The current context is not new. Over the past few years, the investment environment has been marked by cautious optimism, a result of a series of adverse events, from the social outbreak to the pandemic. This sequence has created a climate of distrust that is reflected in the statistics: Gross Fixed Capital Formation has fallen by 4.1% in the second quarter of 2024 compared to the same period last year. This decline is the fourth consecutive one, indicating that investment in the country is trapped in a downward spiral that is difficult to reverse. Economist Jorge Quiroz has raised a pertinent question: Is Chile going through a rough patch, or is it a sign of a process of decline? The doubt is valid, especially considering that, for the first time in 40 years, investment is expected to fall after a year without growth. Stability and confidence, fundamental components for economic development, seem to have disappeared from the horizon. An analysis by the Center for Public Studies (CEP) highlights that, in the last decade, investment has grown at a pace slower than that of the economy, posing a serious risk for the country's future. This mismatch between investment and economic growth can have devastating effects on national production and the quality of life of Chileans. The lack of a key link connecting different areas of the economy is creating a disconnection that could prove fatal if not addressed in a timely manner. It is evident that the outlook is grim. Authorities have urged maintaining a focus on potential future improvements, but this optimistic perspective must be backed by tangible action. Public policies should focus on addressing the accumulated liabilities in terms of investment and fostering an environment that encourages the creation of new projects. The Chilean economy needs a boost to restore confidence and reactivate the investment cycle, which in turn would generate jobs and increase tax revenues. The data is compelling and cannot be ignored. The Chilean economy suffers from a lack of significant investment that restricts not only growth but also innovation and competitiveness. Without an injection of capital and confidence in the future, the country risks being left behind in a world rapidly advancing towards new technologies and opportunities. It is essential that both the government and the private sector work together to create a favorable environment for investment. This includes reviewing regulations, simplifying procedures, and creating incentives for companies to take risks on larger projects. Collaboration between both sectors is crucial to changing expectations and attracting the investment that the country so desperately needs. The current situation presents an opportunity to reflect on the Chilean economic model. It is time to rethink strategies and adopt a more proactive approach that allows us to face challenges with a long-term vision. The economy cannot continue to be tormented by negative figures that only fuel pessimism. In summary, the country stands at a crossroads. The decisions made today will determine the future of investment and, consequently, the quality of life for Chileans. It is time to move beyond inertia and work towards an economic rebirth that, although uncertain, can be possible with the will and coordinated action of all involved parties.