Category: Chile

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.

Luis Felipe Jiménez, Director of Public Credit of Chile will address an audience of issuers, investors, and intermediaries at the next Latin American Borrowers and Investors Forum in Miami on February 16th. The forum will bring together the leading institutions and individuals that shape Latin America’s capital markets. Luis Felipe Jiménez will be joined by Carlos Garcia Moreno, Chief Financial Officer of América Móvil; Fernando Zavala Lombardi, Minister of Finance of Peru; David Rolley, Fund Manager at Loomis Sayles and Nouriel Roubini, Professor of Economics and International Business at New York University. To learn more please visit www.latinfinance.com/labif

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.

President-elect of Chile, Michelle Bachelet, has appointed Andres Velasco as her finance minister to replace Nicolas Eyzaguirre on 11 March when her new government takes office. Velasco, a Harvard professor of international finance and development, was director of international finance at the finance ministry from 1990 to 1992. His appointment has been largely welcomed by the markets who expect him to follow the current policies of spending restraint and economic growth. However, as an academic, some have reservations about his political inexperience.

The world’s largest specialty fertilizer and inorganic industrial chemical producer, Chile’s SQM, is to issue UF3 million of local inflation-linked bonds (worth just over $100 million) to help fund its expansion plans. SQM recently bought two subsidiaries of Dutch chemical group DSM for around $72 million.

Chile’s central bank has reduced its forecast of annual inflation in 2006 from 2.8% to 2.7% as oil prices fall back and the peso continues to strengthen. Although consumer prices rose by 3.7% last year, the highest in five years, inflation in the last two months of 2005 slowed, falling by 0.2% in November and 0.3% in December. Last week the central bank left its benchmark lending rate unchanged at 4.5% for a second consecutive month on expectations of falling consumer prices.

The Chilean government has raised its economic growth forecast this year, from 5.5% to 6%, citing rising consumer demand and high levels of investment. Chile will benefit from investment levels that are nearing 30% of GDP as well as the continuing high international price of copper, the country’s main commodity export.