Chile economy

Some honeymoon Michelle Bachelet has had. Her second presidency was welcomed in by a powerful earthquake in the Atacama desert, followed shortly afterwards by a raging fire in Valparaíso, while most recently a spate of terrorist attacks has been disturbing Chile’s normally relatively tranquil populace.

All this as the economy sputters to its slowest rate of growth since Chile was last shaken by a major earthquake in March 2010, with the central bank confirming the downward trend on Monday when it announced year-on-year economic growth in August of just 0.3 per cent. Read more

The FT’s Benedict Mander examines the tricky task for Chile’s president, Michelle Bachelet, of pushing through reforms to reduce inequality, especially in education, as the economy starts to slow with lower demand for its main export, copper.

What a difference a mountain range makes. To the east of the Andes, Argentina is in the throes of an old fashioned, disorderly devaluation, in which authorities scramble to plug every leaking channel of hard currency flows until at last they are carried off in the flood. To the west, Chile’s authorities are looking on with calm equanimity as their currency gently subsides to its own level.

What is it, other than snow-capped peaks, that unites and separates their two worlds? Read more

Michelle Bachelet (pictured) is well on her way to returning to the Chilean presidency after winning 46.7 per cent of the votes in the first round of the country’s presidential elections on Sunday.

But while the 62-year old former pediatrician is expected to win the second round run-off on December 15 by a comfortable margin, she is also set to inherit an economy that is much less robust than the one she presided over during with her previous stint in 2006-2010. Read more

Better safe than sorry? Chile on Thursday unexpectedly cut its benchmark interest rate by 25bps to 4.75 per cent on Thursday. It’s its first rate cut since January 2012.

Although economic growth for the country – forecast at between 4-4.5 per cent for this year – is still the envy of the region (Mexico and Brazil by contrast are expected to grow 1.7 per cent and 2.4 per cent respectively), it has weakened from previous estimates of 4-5 per cent. Read more

Is Chile edging closer to a rate cut?

Disappointing GDP data lately have certainly increased the chances. Chile’s growth – much lauded by a centre-right government bent on delivering a better performance than under the leftist coalition that ruled Chile for 20 years – has suffered a hiccup lately, fuelling expectations that a rate cut was nearingRead more

Chile is concerned.

It is the world’s top copper producer; copper makes up more than half the value of its exports and 15 per cent of its GDP. Windfalls from sales of the red metal are squirreled into sovereign wealth funds, to allow countercyclical spending on a rainy day. The last thing Chile wants is for copper prices to fall, as they have been doing lately – hitting an 18 month low this week. Read more

By Jude Webber and Jack Farchy

There’s no such thing as a free lunch, so the saying goes.

But a $200m-a-day lunch? That is about what a nearly three-week-old ports strike in Chile is costing in paralysed exports and imports, according to Chile’s Chamber of Commerce. There are some 9,000 tonnes a day of copper trapped in ports in the world’s top copper producing nation because of the stoppage. Read more

Slow down, Chilean consumer spending, you grow too fast.

That is the warning from Capital Economics after Chile published yet another stellar growth figure – a 6.7 per cent leap in economic activity (as measured by the monthly GDP proxy called Imacec) in January compared with January 2012. Read more

Already considered the safest bet for investors in Latin American sovereign debt, the government of Chile received a nod of approval from the ratings agency Standard and Poor’s on Wednesday, as its long-term foreign currency credit rating was notched up to AA-.

This puts the fast-growing Andean nation in some esteemed company – and ahead of all of its regional peers. Read more

The Central Bank of Chile has announced year-on-year GDP growth of 5.7 per cent in the third quarter, beating consensus forecasts of 5.4 per cent. Domestic demand drove GDP growth despite external factors that are proving to be a drag on the economy. Read more

Reinforcing its reputation of spotting problems early and taking action, Chile’s central bank is seeking to head off end-of-year liquidity strains by reinstating a tactic it used last year: a temporary repurchase window allowing banks to pawn bonds for cash. Read more

What do you do if you’re a small country, rich in minerals that went from boom to bust when the bottom fell out of the commodities market? Copy Chile, is the answer.

Chile’s experience as a small, copper-dependent economy that prudently stashed cash during the boom years, allowing it to ride out the 2008-09 world economic crash and uncork anti-cyclical spending, was the perfect case study for Mongolia. Read more

Chile’s peso has been doing some bodybuilding. Is it time for a cold shower?

Already Latin America’s biggest gainer against the dollar this year and the third biggest winner in the world after Hungary’s forint and Poland’s zloty, the peso firmed another 1 per cent on Friday after the Fed’s announcement of a third round of quantitative easing on Thursday. Read more

Is Chile caught in the middle income trap? For Felipe Larraín, finance minister, the sight of buses being burnt on the streets of Santiago is a sign that it is.

“The middle income trap is a concern,” he told journalists on a visit to the FT on Thursday. “There is a point where people feel richer and want things like free [higher] education and free health care. But you have to hold the line.” Read more

One company’s blunder is another company’s opportunity.

On Wednesday, just as Chilean retailer Falabella announced that its profits were down over the first half of 2012, Swedish retailer Hennes & Mauritz AB, better known as H&M, said it would expand into South America, opening a flagship store in Santiago, Chile, during the first half of 2013. Read more

Brazil and Argentina must be green with envy. Economists are increasingly downbeat on Brazil’s growth, cutting their 2012 forecast again (to 1.75 per cent). Argentina’s latest official data, showing flat activity in June was only good because it was not as bad as expected. And then here comes Chile with expansion of 5.5 per cent in the second quarter and 5.4 per cent in the first half, better than market expectations, and the fourth straight quarter of growth.  Read more

Colombia on July shocked the market with an interest rate cut (its first in two years) because of expectations of lower growth ahead. Will Chile follow suit this month?

Bold moves have been something of a hallmark of Chilean central bank monetary policy in the past, but as things stand, the odds are that the bank will sit out on a cut and leave its key policy rate at 5 per cent for a seventh straight month. Read more

Chile got a nice surprise on Friday, in the shape of unexpectedly low inflation numbers. But there was a rather nastier surprise for one its flagship companies, Cencosud: market uncertainty has forced it to slash the size of its upcoming IPO in the US.

Central banks tend spend a lot of time and energy combating inflation, so it must have been an especially pleasant start to the weekend for Chile’s monetary authority to find that inflation was a non-event in MayRead more

Brazil wants to cut interest rates more; Colombia has increased rates three times in the last four months. But Chile looks likely to sit on its hands for now.

That is the signal from the minutes of the February meeting, released on Wednesday, in which it explained its decision to weigh, but reject, a 25 basis point cut from the current 5 per cent. Read more