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Investing.com -- Chile’s Finance Minister Mario Marcel resigned on Friday, citing personal reasons, with the market reacting mildly negative to the news.
The Chilean peso (CLP) depreciated by 0.4% following the announcement but remained off the day’s highs.
Nicolas Grau, currently serving as minister of economy, will replace Marcel for the remaining seven months of President Boric’s administration. Alvaro Garcia from the moderate PPD (NASDAQ:PPD) party will take over Grau’s position as economy minister.
Marcel played a key role in passing the pension reform this year and the law to reduce tax evasion last year. In his new role, Grau will be responsible for designing the 2026 budget, which is expected to be presented by late September. He will also oversee the tax change proposal for small and medium enterprises and the new financing mechanism for tertiary education.
The change was due to personal reasons and not a signal of pressure from the Left to increase spending ahead of elections. However, BofA notes that investors are concerned about the risk of higher government spending as Marcel was viewed as a guarantor of prudent fiscal policies.
This concern comes despite some fiscal deterioration in the last two years, with the fiscal deficit at 2.8% of GDP, twice the target for 2025, following a large adjustment Marcel implemented in his first year.
Bank of America notes that higher uncertainty about spending could be another reason for Chile’s central bank to pause its easing cycle in September, after cutting rates by 25 basis points to 4.75% in July. The bank forecasts one more rate cut this year and another in the first half of 2026, bringing the rate to 4.25%, though there are risks of delays.
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