Hallgarten Warns of Chile Power Crisis

Chile is about to go through a serious energy shortage that may develop into a full-blown crunching crisis if events go against it, says Hallgarten & Company, the research boutique. “2008 GDP and growth figures are almost certain to be affected by events of the coming months, and the knock-on effects of copper production shortfalls into an already tight metals market are likely to be felt around the world,” says the shop. According to Hallgarten, electricity generation costs will be substantially higher than in 2007 due to lack of hydro generation supply and lower natural gas deliveries from Argentina. It warns that even if Chile manages to supply higher cost fuel to all its thermal electric power stations and they run non-stop, it is likely supply will still not be enough to meet the demand required to sustain macro growth at forecast levels. Hallgarten’s realistic case scenario calls for substantially higher energy costs for the country that will eat into GDP growth and stoke inflation. The worst case scenario implies severe across-the board disruptions that would markedly affect the economy. “The only thing that remains to be seen is not whether the country goes through an energy crisis, but how deep that crisis will be,” Hallgarten concludes.