Category: Chile

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

Chile’s Central Bank has raised its benchmark overnight lending rate 25 basis points to 4.75%, the first hike in three months. Higher-than-expected inflation figures for January prompted the bank to move to check consumer spending. Inflation was up 0.1% in January, after falling for two consecutive months in November through December. Annual inflation rose to 4.1%, above the maximum 4% targeted.

Chile’s trade surplus fell from $1.17 billion in December to $759 million in January, less than expected but due to the increase in capital goods imports, according to analysts. This was the first time in four months the surplus had fallen and was 1.3% down on last year’s figure of $769 million. Exports for the month were up 23% year on year to $3.65 billion, while imports rose 31% to $2.89 billion as mining companies took advantage of continuing strong commodity prices to invest in imported machinery.

Chile’s economy expanded by 5.3% in December year on year, down from 6.1% a month earlier. Growth last year was driven by record copper prices; copper is the country’s leading export. Economists had expected stronger growth figures for the month, estimating an average 5.7%. The central bank has estimated growth for the year will reach 6.3%. It is due to release figures in March. Meantime, the bank is expected to raise interest rates by 25 basis points to 4.75% at its monthly meeting later this week to check inflation.

Meantime, inflation in neighboring Chile was up 0.1% in January, after falling for two consecutive months in November through December. Year-on-year inflation rose to 4.1%. The rise was driven by higher energy costs. Economists expect the central bank to raise the benchmark interest rate later this week by 25 basis points to 4.75% to check inflation.

Chile’s budget surplus last year rose to $5.4 billion or 4.8% of GDP, more than double the figure of 2.2% in 2004, and the highest level in 18 years. The better-than-expected surplus was driven by higher tax revenues from increased consumer spending and record international copper prices. Copper is Chile’s leading export and state-owned mining company Codelco turned in multi-billion dollar profits last year.