The iShares MSCI Chile ETF (NYSEARCA:ECH) experienced a remarkable return of 70.33% in 2025, driven by a surge in copper prices and significant political developments in Chile. This performance has quietly positioned the fund as one of the standout investments of the year, outpacing both the S&P 500 and broader emerging markets. Despite its impressive gains, the fund has garnered little attention in investment discussions or on social media platforms.
Chile is a critical player in the global copper market, producing approximately 25% of the world’s copper supply. The strong demand for copper, particularly for its use in electric vehicles and renewable energy infrastructure, has led to increased profitability for Chilean mining companies, which dominate the ECH’s holdings. The fund’s top three investments—Sociedad Química y Minera de Chile (NYSE:SQM) at 14%, Banco de Chile (NYSE:BCH) at 12%, and LATAM Airlines (NYSE:LTM) also at 12%—collectively account for nearly 40% of its portfolio.
Understanding ECH’s Performance Drivers
The upward momentum of ECH can be attributed to various factors, primarily the dynamics of commodity pricing. Rising copper prices throughout 2025 have bolstered the profits of Chilean mining companies, thereby lifting the overall market sentiment towards Chilean equities. Recent events, such as a strike at a major copper mine, have further underscored the tight supply constraints impacting production.
Investors should closely monitor copper futures on the London Metal Exchange for insights into the potential trajectory of ECH. With supply issues stemming from mine accidents in Indonesia and labor disputes in Chile, the market continues to face constraints. As demand for copper remains robust, particularly in sectors like electric vehicle manufacturing and renewable energy, the profitability of Chilean mining firms is expected to remain strong.
The Chilean central bank’s decision to cut interest rates from 5.75% to 4.5% throughout 2025 has also played a role in supporting equity valuations. The final reduction of 25 basis points occurred in December, providing a favorable borrowing environment that has stimulated economic activity. Investors should keep an eye on the central bank’s monthly policy meetings for guidance on the continuation of this easing cycle.
Investment Risks and Opportunities
While ECH’s concentration on a few key holdings creates opportunities, it also introduces risks. The top investment, SQM, significantly influences the fund’s performance. The recovery of LATAM Airlines from its pandemic-era bankruptcy has contributed to notable gains, while the banking sector has benefited from Chile’s economic stabilization.
The recent strong showing of right-wing candidate Jose Antonio Kast in the November 2025 presidential election has signaled a potential shift towards market-friendly policies, which could reduce the political risk premium affecting Chilean assets. This development may enhance investor confidence and further support the fund’s gains.
For those particularly interested in copper, the Global X Copper Miners ETF (NYSEARCA:COPX) offers a direct investment avenue in copper mining, featuring better liquidity with assets totaling $3.5 billion, compared to ECH’s $1 billion. This fund provides exposure to global copper miners and reduces the risks associated with a single-country focus.
In summary, the performance of the iShares MSCI Chile ETF in 2025 largely hinges on the sustainability of copper prices amidst ongoing supply constraints. Investors should pay close attention to quarterly earnings from its top holdings and the broader trends in commodity pricing to gauge future performance.
