Category: Chile

Chile’s Central Bank has raised its inflation forecast for the year from 2.3% to 2.8%, saying higher food and gas prices will push up prices more than expected. The bank’s target this year is 3%, plus or minus 1 percentage point. The bank’s monetary committee also raised core inflation forecasts, from 2.6% in January to 2.7%.

Chile was one of only five countries – and the only one from Latin America – to be invited to start talks with the Organisation for Economic Co-operation and Development (OECD) regarding membership. Chile will become the first nation in South America, and the second in Latin America (after Mexico) to join the group of 30 countries that meet regularly to compare policy and best practice in economic, environmental and social areas. The Organisation said it had also called for “enhanced engagement” with Brazil, a precursor to eventual membership.

Fitch Ratings Tuesday revised the outlook on Chile’s long-term foreign and local currency sovereign Issuer Default Ratings (IDR) to positive from stable. The ratings action reflects improvements in its external balance sheet helped by “further enhancement of its prudent, rules-based macroeconomic policies along with high commodity prices.” Fitch expects continuing positive trends in public finance and external balance sheet, which “raise the likelihood of a ratings upgrade over a horizon of two years,” says Theresa Paiz Fredel, senior director for Latin American Sovereign Ratings.

Ontario Teachers Pension Plan said Tuesday it agreed to purchase a 51% stake in Empresa de Servicios Sanitarios del Bio-Bio, a Chilean water utility, for $328m. The deal is the fund’s first foray into Latin American infrastructure, Vittorio Perona, head of utilities and energy investment banking at Dresdner in London, tells LatinFinance. “Chile’s high quality investment climate, with a good legal and regulatory environment and access to credit” gave the private equity-like pension fund the confidence to pursue the deal, says Perona, whose group advised OTPP on the acquisition from Southern Cross, an Argentina-based private equity shop. The financial closing of the deal is expected in July. OTPP is also buying 100% of Aguas Nuevo Sur Maule from Southern Cross for an undisclosed sum.

Chilean state-owned BancoEstado, the country’s third-largest bank in lending terms, is preparing to issue local bonds worth around $89m today, Tuesday, the institution said in a filing with the Santiago Stock Exchange. The inflation-adjusted notes will carry a maturity of 24.5 years. Money raised will be used for consumer and mortgage lending, said the bank.

Chile’s second-largest financial institution, Banco de Chile, is planning to raise around $212m via an offering of new shares, the bank said in a filing with the country’s securities commission, SVS. The money raised from the sale of 2,516m shares will be used to finance growth of the bank’s business. The proposal will be put to shareholders at a meeting on 17 May.

Chile’s Central Bank has kept the benchmark interest rate steady at 5%, in line with market expectations. The Bank said that external conditions continued to be favorable and that inflation, at just below 3%, was where expected in the medium to long term.

Chilean electricity provider Colbún is hoping to raise up to $425m via bond offerings in the first quarter of the year, to be issued in 8- and 20-year tranches. Earlier this year, the company had indicated it was hoping to pull in around $300m to finance investment. Colbún has succeeded in improving its financial position in recent years – boosting liquidity and extending its debt profile. The company has been investing in expanding generation capacity and expects three new facilities to come on line in 2007, generating an extra 145MW or 700 GWh a year.

JPMorgan Chase has set a benchmark in Chile with a $103m equivalent issue of peso-denominated bonds. The transaction is the longest-dated straight peso-denominated corporate bond so far in the local market, according to Cristian Letelier, a banker at IM Trust, one of the two underwriters. The 2017 zero coupon bonds priced at 53.40 of face value and pay an implicit yield 6.48% throughout their life. The face value of the deal is the Chilean peso equivalent of $193m. The notes priced Tuesday at 52bp over the 10-year BTP bond issued by the government. Corporate deals in UF, inflation-linked units, are more common in the Chilean market and typically run to around 20 years in duration. Until this week, JPMorgan’s Chilean subsidiary has funded itself solely from its parent. The idea behind the issuance is to diversify its sources of funding, says Letelier. LarrainVial was the other bookrunner on the deal.

Chile’s economy expanded 6.5% in March compared with the same month a year ago, according to Central Bank figures issued on Monday. The economic growth figures, which were better than market expectations, are likely to lead to further interest rates hikes this year, analysts predict. On a monthly basis, GDP expanded by 1.4% and for the 12 months through March it rose to 7.0%. Final results for the first quarter of the year are due to be released on May 23, the Central Bank added.