Category: Chile

Michelle Bachelet became Chile’s first female president, and only Latin America’s fourth, when she was sworn into office in Valparaiso on Saturday. The inauguration ceremony was attended by more than two dozen heads of state including Bolivia’s Evo Morales, Venezuelan Hugo Chávez, Brazilian Luiz Inácio Lula de Silva and Argentina’s Nestór Kirchner. US Secretary of State, Condoleezza Rice was also present. Bachelet, from the ruling center-left coalition, inherits a healthy economy from her predecessor Ricardo Lagos, president since 2000, who called the handover of power a “celebration of democracy”. His son, Ricardo Lagos Weber, was recently appointed government spokesperson by Bachelet.

Foreign direct investment (FDI) entering Chile last year fell by 50% to $3.75 billion from $7.15 billion in 2004. However, the seemingly poor figures last year follow a year in which unusually high investment in M&A distorted the overall picture. A few megadeals in 2004 — such as the $2.15 billion investment by Endesa España in its Chilean unit, as part of its financial restructuring, and the acquisition of Telefónica Móviles de Chile by Telefónica Móviles de España for $1.37 billion — inflated overall figures. This year, FDI was characterized by investment in production rather than M&A. In total, mining attracted the largest share of FDI (42.9%), followed by transport and communications (29.6%) and services (17.1%). Mexico’s largest investors were Australia, Mexico, the United Kingdom and Spain.

Chile’s consumer price index fell 0.1% in February after rising by the same amount in January. Economists say the surprise fall may lead to a slowdown in Central Bank interest rate rises from its current level of 4.75% (benchmark overnight lending). The country’s annual inflation rate remained at 4.1% in February, above the maximum target of 4% set by the government.

Chile’s state-owned copper producer Codelco is pondering spinning out its silver and gold assets into a publicly traded company to take advantage of recent rises in both precious metals. Codelco is studying various options to raise financing to fund its $12 billion investment program, among them a possible offering of shares in a newly formed company. Codelco produces silver and gold as a byproduct of its copper mining which earned the Chilean government a record $4.9 billion last year. Last month the producer was valued at around $24.5 to $25.7 billion. It is thought that the new company would list its shares on some combination of the Toronto, New York or London stock exchanges.

Chile’s year-on-year rise in industrial production surged to 7.7% last month, just below the average of 8% expected by the market. The rise was driven by durable goods production and oil refining and was the strongest hike in output since April last year when production leapt 10.1%. The 7.7% rise in January was up from 6% in December.

UK oil and gas company BG Group has won the contract to build and supply liquid natural gas (LNG) in Chile. The UK Group beat off France’s Suez and Spain’s YPF Repsol, although the price offered by the company was not revealed. The LNG regasification plant to be built will be located on the central coast at Quintero bay. BG will commit $350 million to the project which will increase Chile’s production of petroleum and natural gas – as part of its program of energy diversification – and reduce its dependence on imported natural gas from neighboring Argentina. Chilean power company Endesa Chile and gas distributor Metrogas have committed to buying from the plant. The plant is likely to be operational in 2008/9.

Chile and Panama will sign a free trade accord in the next few weeks following the successful conclusion of trade talks that began nearly 10 years ago. The countries’ economies are closely linked as Chile is Latin America’s heaviest user of the Panama Canal, with 50% of the country’s external trade reliant on the thoroughfare. Last year, exports from Chile to Panama totaled $111.5 million, while imports from Panama reached $10.8 million.

Chilean investment fund Southern Cross is set to buy the controlling stakes in two Chilean water companies from Anglo-German water firm RWE Thames. Southern Cross has reached an agreement to pay at least $400 million for control of Essbío and Aguas Nuevo Sur Maule, as well as a promise to invest a further $300 million in developing the companies. Both water companies operate to the south of the capital, Santiago.

Chile’s external debt as a percentage of GDP fell from 46% in 2004 to 39.5% last year, its lowest level in eight years. Total external debt in 2005 rose 3.6% year on year to $44.85 billion. Of this, 79% of the total was accounted for by private sector debt; with public sector debt representing only 21%. And just over half of the private sector debt belonged to foreign-owned companies. In addition, short-term term debt accounted for only 16% of total debt, lower than in most emerging markets