Codelco ratings affirmed at BBB+ as Fitch flags production and governance pressure

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Codelco ratings affirmed by Fitch

Highlights

Codelco's Long-Term Foreign and Local Currency Issuer Default Ratings and senior unsecured notes remain at 'BBB+' with a stable outlook, according to Fitch Ratings.
Fitch forecasts Codelco's production will drop to 1.31 million tonnes in 2025, down 19% from 2021, with further declines expected in 2026 before a slight recovery in 2027.
Governance deficiencies, including recent transparency and reporting issues, led Fitch to cut Codelco's standalone credit profile by one notch despite its continued strategic importance to Chile.

Fitch keeps stable view on state-backed credit profile

As reported by Fitch Ratings, Codelco's Long-Term Foreign and Local Currency Issuer Default Ratings and its senior unsecured long-term notes remain at 'BBB+', while its Long-Term National Scale Ratings stay at 'AA+(cl)'. Fitch also assesses the company's Standalone Credit Profile at 'b+' and says the outlook is stable.

The agency says the ratings reflect Codelco's leading position in the global copper market, large operating scale and long reserve life, alongside its strategic importance to Chile through full state ownership. Fitch applies a top-down, minus-one-notch approach because it views decision-making and oversight as very strong, while precedent of support and incentive to support are assessed as strong.

Fitch says government support remains important for the rating case, pointing to Chile's role in strategic guidelines, debt issuance and investment decisions. It also highlights continued support that lets Codelco retain and reinvest profits, including 100% of 2025 net income in 2026, and its agreement with CORFO to negotiate and obtain benefits from lithium opportunities.

Production decline and governance issues weigh on outlook

Despite the stable outlook, Fitch says Codelco faces challenges in restoring production after output from its directly operated mines fell to 1.31 million tonnes in 2025, down 19% from 1.62 million tonnes in 2021. The agency expects a further mid-single-digit decline in 2026, followed by a modest recovery to about 1.32 million tonnes in 2027.

Lower output at El Teniente and Chuquicamata, weaker performance from new projects, lower ore grades and the El Teniente collapse are driving the decline, Fitch says. It adds that output from new projects, public-private partnerships and capital allocation will be key to stabilizing production and supporting a rebound.

Fitch also says Codelco's governance factor carries "some deficiencies," cutting the standalone profile by one notch. That assessment reflects state ownership, recent concerns over information quality and transparency, and audit and investigation processes tied to inconsistencies in reported production volumes for 2024 and 2025.

Codelco's strategic role in Chile remains central to the overall rating. Fitch notes the miner accounted for about 26% of Chilean copper production, 16% of total exports and 2.3% of central government revenue in 2025, meaning any default could hurt fiscal income and affect financing access for the government or other state-linked entities.

In our earlier article on rising sovereign borrowing risks in a higher-rate environment, we noted that persistent geopolitical shocks and elevated public spending can erode fiscal headroom and worsen credit outlooks. We also highlighted that emerging and frontier markets are particularly exposed because debt-servicing costs tend to be high relative to narrower revenue bases, with inflation pressures amplified by disruptions in energy and food markets.

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