Category: Chile

Chile’s monetary policy committee meets Thursday and Goldman Sachs predicts a 25bp-50bp rise, depending on inflation expectations. Goldman predicts rates will hit at least 6.0% by year-end 2007. “Additional tightening might be needed in 2008 if the inflation dynamics or the balance of inflation risks does not improve,” it adds.

Chile’s Codelco is rumored to have mandated BBVA to lead a $400m 7-year term loan, according to bankers not on the deal. The transaction was highly sought after and expected to set the tone for blue chips in this market, where margins continue to compress. Bankers away from the deal estimate the price will come somewhere between 13bp and 16bp over Libor, skimpy even for this market. Codelco, which is owned by the government, is one of the highest rated credits in the region, with an Aa3 from Moody’s.

Chile’s inflation rate in July rose by 1.1%, faster than expected, taking inflation for the 12 months through July up to 3.8% from 3.2% in the 12 months through June. Chile’s Central Bank is targeting 3%, plus or minus 1 percentage point, this year. Rising fuel and food prices pushed up consumer prices, said national statistics institute INE. Analysts expect the rising prices to prompt the Central Bank to continue cranking up interest rates. Minutes just published of the last monetary policy committee meeting show that the committee contemplated hiking up rates by 50bp last month, but opted instead for a 25bp rise, taking the benchmark rate up to 5.25%.

Grupo Latino de Radiodifusion has bought IberoAmerican Radio Chile from Claxon for $74.6m. IberoAmerican Radio Chile runs the Pudahuel FM, Rock & Pop, Corazon, FM Dos, Concierto, Futuro, FM Hit and Imagina networks.

Chile’s Grupo Security has priced a $54m equivalent in UF issue of 21-year bonds in two tranches through IM Trust, according to Dealogic. The domestic issue priced at 96.730 with a 3.800% coupon to yield 4.075% on a $36m equivalent piece and 96.370 with the same coupon to yield 4.102% on an $18m equivalent piece. Both are callable in 2013 and the larger tranche amortizes from 2011.

Chile’s Central Bank is raising the ceiling for pension funds’ investment in foreign assets from 30% to 35% of assets under management, effective August 9. The move follows the approval of a bill passed by Congress earlier this month amending the pension funds’ foreign investment limit. The ceiling for foreign asset holdings will be increased further to 45% within no less than nine months. Commenting on the move, Goldman Sachs said it didn’t expect the measure to have much effect on the CLP due to current conditions and the nature of pensions funds’ forex exposure. It added that “additional purchases of foreign assets would not necessarily lead to significant pension funds divestment of local fixed and variable income assets, because pension funds hold substantial amounts of liquidity in the domestic financial system.” Chile’s six pension fund managers – AFPs – reported assets under management of $101bn as of June 30.

Canada’s New World Resource has taken an option to acquire up to a 100% interest in the 1,660 hectare La Negra lead-zinc-silver project, in central Chile. Through the deal with Inversiones Y Minería Andalé, a Chilean firm, New World has the right to acquire an undivided 80% interest by spending $1m on exploration, paying $600,000 and issuing 550,000 shares, over three years. It can acquire the remaining 20% interest in the project by paying Andalé an additional $250,000 and issuing to it an additional 250,000 shares. The agreement is pending TSX Venture Exchange approval. The project is located approximately 350km north of Santiago. New World president John Lando says that in Bolivia, the firm continues advanced discussions for the acquisition of a substantial land package surrounding the Lipeña project. It is hoping to start exploration there after doing a deal with state mining company Comibol.

Chilean state-owned BancoEstado, the country’s third-largest bank, sold just over $216m worth (UF6m) of inflation-adjusted local bonds on Wednesday. The 10-year bonds were sold at a yield of 3.85%, equivalent to a spread of 70bp over 10-year treasuries, higher than the 60bp spread initially anticipated for the AAA issuer, said analysts.

Chile’s industrial production rose 6.7%, year on year, in June, according to the national statistics institute. The increase exceeded most analysts’ forecasts driven by stronger consumer demand and growing exports. The Central Bank is expected to continue raising the overnight benchmark lending to head off inflation, say analysts.

Chilean politician and businessman Sebastián Piñera has stepped down from the helm of national air carrier LAN to concentrate on his role in the political arena. He has also said he will distance himself from technology company Quintec, of which he is a director. Piñera was beaten by Michelle Bachelet in the last elections but looks likely to be the choice by the right as its candidate for the 2009 elections.