Category: Chile

Chile’s central bank is seen keeping its monetary policy rate at 0.5% today and is not expected to hike it until at least 2Q, say Morgan Stanley and Barclays, in line with market consensus. “Although the central bank is likely to maintain the language regarding the stability of the policy rate at 0.5% until ‘at least Q2,’ it will probably at least highlight the recent peso depreciation in the accompanying statement,” Barclays says. The CLP has depreciated to CLP550 per USD on February 10 from CLP535 per USD February 1. Morgan Stanley believes that the ongoing economic recovery remains on track and broadly in line with the central bank’s base scenario. Although base effects should push annual inflation into positive territory as early as this month, it says price pressures remain largely muted. It forecasts annual inflation will reach 2.6% by the end of 2010, from a contraction of 1.4% at the end of 2009.

Chile’s outgoing president Michelle Bachelet has named a new board of directors at state-owned copper producer Codelco. The new board, to be chaired by current board member Nicolas Majiluf, will take office March 1. It will be responsible for choosing a CEO to succeed Jose Pablo Arellano, who has said he will not continue beyond March. The board includes former national budget director Alberto Arenas, former Codelco CEO Marcos Lima, Andres Sanfuentes and Marcos Buchi. Arenas, Sanfuentes and Majiluf will be on the board until May 11 this year, while Lima and Buchi will remain there until May 2011.

MC Inversiones, a Chile-based investment vehicle of Mitsubishi, is taking a 25% stake in Cia. Minera del Pacifico (CMP), a mining subsidiary of steel company CAP for $924m. Mitsubishi will merge its Cia. Minera Huasco with CMP, gaining a 15.9% stake in CMP. It will then fund a $400m capital increase in CMP, elevating its stake in the mining company to 25%. The seller values the total stake purchased at $924m. CAP says it will hold a shareholder meeting March 10 to approve the deal. CAP also says it has hired Celfin Capital to analyze the deal and that JPMorgan conducted a fairness opinion on the transaction. Japanese firms aim to secure a long-term and stable supply of resources, according to the Japan Bank for International Cooperation, which last month signed a $245m loan for Chile’s Minera Los Pelambres to finance expansion. Pelambres is 60% owned by Antofagasta alongside Nippon Mining & Metals Co, Mitsubishi, Marubeni and Mitsui.

Chilean president-elect Sebastian Pinera has named Harvard-educated economist Felipe Larrain finance minister, according to local press reports. Larrain, an economics professor at the Pontificia Universidad Catolica de Chile and member of the board of several companies in Chile, advised Pinera on economics during the campaign process. University of Chicago-trained economist Juan Andres Fontaine, currently the chairman of the board at the Bolsa Electronica de Chile, was named Economy Minister. The new administration takes office March 11.

Investment shop Eton Park says it will invest $200m of equity in hydroelectric energy company HydroChile to take an 83% stake, the company says. Eton says its investment will help the Chilean company develop at least 200MW of run-of-river capacity in the 6th, 7th and 8th regions of Chile. HydroChile was founded in 2007 and develops run-of-river hydroelectric power projects with capacities ranging between 10MW to 50MW. Eton Park, which also holds a 28% stake in Brazilian renewable energy company ERSA, manages about $13bn and has offices in New York, London and Hong Kong. It invests in infrastructure assets in emerging markets with a focus on LatAm.

Chile’s Costa Verde Aeronautica, which has a 25% stake in local airline LAN, says it has decided to pursue a $1bn capital increase through the issuance of 500m shares. Equity analysts in Chile covering LAN believe the capital increase will be used to acquire a 26% stake in the airline held by Axxion and Inversiones Santa Cecilia. The latter are controlled by president-elect Sebastian Piñera. Costa Verde does not say what the funds will be used for. Simultaneously, Axxion’s shareholders have authorized the sale of its 19% stake in LAN, but do not say who the stake will be sold to.

Peru’s Wong is selling its stake in Chilean retailer Cencosud, according to a regulatory filing. The planned auction of 49.75m shares would bring in CLP91.64bn ($170m) at Wednesday’s price. Wong acquired the shares – equal to a 2.3% stake – when it sold its supermarket chain to Cencosud in 2007. It does not indicate when it plans to sell the shares. Cencosud closed Wednesday at CLP1,842, down 1.4% from the previous day.

Chile’s Banco Bice has sold UF3m ($124m) in 5-year local bonds with a 3.00% coupon to yield 3.23%, a spread of 82bp over the 5-year central bank bonds. The bank managed the AA rated issue itself. Banco Bice, founded in 1979, has about $500m in assets, according to information from the local bank regulator.

A positive rating action is a possibility for Chile, says Shelly Shetty, senior director of Fitch Ratings. “In the single A category, there is scope for Chile to move up,” Shetty tells LatinFinance. She notes that the sovereign’s debt-to-GDP ratio is low compared to the median of A rated countries. In addition, she says the scope to upgrade the sovereign above its existing A rating depends on president-elect Sebastian Pinera delivering on promises related to reforms in labor, as well as improvements in the country’s education sector. Another country she sees on a positive path is Panama, which she says has manageable financing needs but warns that its debt burden is higher than that of the BBB median. She expects Panama’s GDP to grow 4% in 2010, the highest rating in LatAm for the year. Uruguay, rated BB minus, also has a positive outlook due to its high liquidity. Shetty believes Uruguay will benefit from Brazil’s growth and positive FDI inflows this year. Suriname is also on a positive rating path, adds Shetty.

The Japan Bank for International Cooperation (JBIC) has signed a $245m loan for Chile’s Minera Los Pelambres to finance expansion. The lender says it is responding to a need from Japanese firms to secure a long-term and stable supply of resources. “In the face of pressure due to a sharp increase in copper concentrate demand in the People’s Republic of China and Republic of India, Japan is increasingly urged to secure copper concentrate,” says JBIC. It adds that it will keep providing financial support to facilitate the development and acquisition of strategically important resources through project structuring and risk-taking functions that draw on its various financial facilities. The borrower aims to boost capacity at the Pelambres copper mine by approximately 370,000 tons of concentrates annually, starting in Q1. Japanese firms will take delivery of approximately 180,000 tons from this increased portion. Los Pelambres is 60% owned by Antofagasta alongside Nippon Mining & Metals Co, Mitsubishi, Marubeni and Mitsui. In May, JBIC provided a loan for the Esperanza project, owned by Antofagasta (70%) and Marubeni (30%).