Category: Chile

After an eight-year absence from the local bond market, Telefónica CTC Chile, the local subsidiary of Spain’s Telefónica, is to return with a $100 million offering of local inflation-linked bonds. CTC Chile, the country’s largest fixed-line telephone operator, will issue UF3 million of the bonds to mature in 2012; the bonds will carry a coupon rate of 3.75%.

Fourth-quarter economic growth in Chile showed signs of heating up, coming in just ahead of the average estimates of market watchers. GDP grew 5.8%, driven by the continuing record highs of the price of copper, Chile’s main export product. The last-quarter growth took overall annual expansion to 6.3%, the fastest rate in the past eight years. (The growth figures, released Wednesday by the Central Bank, were revised up from the Bank’s earlier estimated figure of 5.2%.)

Chilean retail chain Cencosud has raised $130.8 million in the local market after placing UF4 million inflation-linked bonds. The bonds, which mature in 2027, carry an interest rate of 4.52%. The sale is the final part of the company’s plan to refinance short-term debt. Cencosud has supermarkets, shopping malls, home improvement stores and department stores in Argentina and Chile. It has been expanding aggressively over the past few years and last year made net profits of $199 million, up 96% on 2004.

The Central Bank of Chile has left the country’s overnight benchmark lending rate unchanged at 4.75%, in line with market expectations. Slower-than-expected economic growth and falling inflation last month prompted the hold in rates. The move will help Chile’s exporters, who have been hit by the strength of the peso against the US dollar. Exports account for over one-third of the country’s GDP.

Chile’s newly elected president, Michelle Bachelet, has appointed a new head for Codelco, the country’s state-owned copper producer. José Pablo Arellano, an economics graduate from Harvard University and former government budget director, will become executive president, replacing Juan Villarzu. Arellano has been appointed to oversee the $12 billion investment plan that will allow Codelco to expand output in the face of rising global demand, in particular from China. Last year Codelco earned the Chilean government a record $4.9 billion.

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.